Selling Your Home

March 2014 Tax Report pg 01Selling Your Home, it's great to make money on the sale of a home, but. the gain is potentially taxable. The good news is that you may qualify for a generous federal income-tax exclusion. General Rules Single taxpayers may qualify to exclude gain of up to $250,000 if they both owned and used the home as their principal residence for at least two of the five years before the sale. Similarly, married couples who file jointly may exclude as much as $500,000 of gain. At least one of the spouses must have owned the home for two of the last five years, and both must have used it as a principal residence for two of the last live years. In general, a single taxpayer may use the exclusion only every two years. Similarly, a married couple may use it only if neither individual used the exclusion within the two-year period ending on the sale date. Reduced Exclusion A taxpayer who doesn't meet the tests described above may qualify for an exclusion of less than $250,000$500,000 if the primary reason for the sale was a change in place of employment, a health condition, or certain "unforeseen circumstances." Example. Prior to the sale of their principal residence for a $400,000 gain, Bill and Mary (mar-ried filing jointly) lived in the house for one year. The primary reason for the move was that Mary took a new job in another state. Since Bill and Mary were in the house for only one year, they will get half the applicableexclusion, or $250,000, and they will have to report the additional $150,000 in gain. The IRS assumes that a sale is the result of a change in place of employment if the new job location is at least 50 miles farther from the sold residence than the old job location was. Similarly, a sale is assumed to be for health reasons if a doctor recommended the change of residence. The person with the new job location or health condition can be the taxpayer, the taxpayer's spouse, a co-owner of the residence, or a person sharing the taxpayer's household. Taxpayers who sell their homes to care for sick family members may also qualify for a reduced exclusion. Talk to Us There are certain additional restrictions on the gain exclusion that can apply to taxpayers who have rented their homes, maintained home offices, or turned a second home into a principal residence. We can give you the details and explain how the other rules discussed here apply in your situation. Please contact us if we can help.

2014 Retirement Plan Limits

Every year, the IRS reviews various limits related to retire-ment plans for potential jolla.-tion adjustments. For time 2014 tax year, some limits changed and others did not. Here are some highlights. Retirement savings plans. The amount that workers may contribute to their 401(k), 403(b), and 457 plans remains unchanged at $17,500. Also unchanged is the extra catch-up contribution of $5,500 for those 50 arid older. Contribution to SIMPLE retirement accounts are again limited to $12,000, with an additional $2,500 catch-up for participants age 50 and older. Annual additions limit. The limit on annual additions to most defined contribution plan accounts has increased by $1,000 to $52,000 (or 100% of compensation, if less). IRAs. The contribution limit for traditional and Roth individual retirement accounts (IRAs) remains at $5,500, with an extra $1,000 catch-up contribution available for those 50 and older.