In recent years, home values have soared, presenting an opportunity for homeowners with substantial equity to consider a unique tax benefit.
Section 121 in the IRS code allows for homeowners who meet certain requirements to exclude up to $500,000 of capital gain on the sale of their principal residence. Single or married taxpayers filing separately can exclude up to $250,000 of capital gain. Taxpayers must meet the following requirements:
They must have owned and used the home as a principal residence during at least 2 out of the last 5 years.
They should not have excluded gain from another home during the two years before the current sale.
The property should not have been acquired through a 1031 exchange during the past five years.
Capital gain is determined as selling price, less sales costs, less basis in the property which is the purchase price paid for the home plus capital improvements made during the tenure. Capital gains more than the exclusion amounts are taxed at the capital gains rate which varies between 0% and 20% depending on the taxpayers adjusted gross income in the year of the sale.
Some exceptions for divorce, death of a spouse, or military service may apply. For more information, see IRS Publication 523 and download our Homeowners Tax Guide. It is always advisable to seek the counsel of your tax professional for your particular situation.
Many of today’s homeowners have accumulated multiple high-tech “smart” devices to make their home more convenient, economical, and fun to operate. When they decide to sell the home, they need to make the listing agent completely aware of whether they will be included in the sale of the home.
Some of these things easily meet the definition of real property because they are permanently installed like thermostats, doorbells, cameras, garage door openers, and pool equipment monitors. A rule of thumb mentioned frequently is that if it were removed, the functionality would cease or if there would be evidence of where it had been, it is probably real property and is included in the sale.
Other devices like virtual assistants made by Amazon, Apple, or Google, may not specifically meet that criteria but they are needed to operate things like electrical switches and plugs, or lamps. It becomes a grey area of whether it is real property when TV’s, doorbells, garage door openers, and other devices are dependent on the virtual assistants.
Door locks, as well as some other devices, have a master code written on them that allows the new owner to reset the combination ensuring not only their safety but potential liability for the seller. In some cases, the seller will need to do this using the app on their computer or phone while it is still connected to their home network. It may be prudent to arrange a time for the seller to reset the devices in question for the buyers’ convenience and security.
Smart home additions could easily be a selling point for potential buyers and sellers need to weigh the benefits of promoting the advantages of such and including those items in the sale of the home.
Make an inventory of what devices stay with the home and what needs to be done to reset them for the new owner. This could be done at the time of listing the home and given to the listing agent at the same time the listing agreement is signed. Your listing agent will know how to handle it, but decisions must be made before the home is put on the market or it is shown to any prospective purchasers.
Whether you’re a seasoned homeowner or just starting this thrilling chapter, every time you turn your key, you’re not just entering a house but also embedding yourself in a neighborhood. The heartbeat of a vibrant community doesn’t solely rest upon pristine lawns or architectural beauty, but predominantly on its residents — wonderful folks like you! Consider these suggestions to enjoy your new neighborhood and actively contributing to making it a wonderful place to live.
Foster Connection – Begin your journey by fostering connections. Introduce yourself to your neighbors, participate in or organize social events, and involve yourself in local gatherings, HOA, Next Door, or forums. Establishing a network of friendly faces creates a sense of belonging and shared responsibility towards the well-being of the neighborhood.
Create a Safe Environment – A safe community is a serene community. Be mindful of adhering to speed limits while driving through your neighborhood, watch out for children playing, and consider organizing or participating in a neighborhood watch program. Ensuring that everyone feels secure enhances the quality of life for all residents.
Champion Cleanliness and Green Practices – Your new neighborhood is an extension of your home. Engage in and advocate for practices like regular clean-up drives, recycling initiatives, and maintaining green spaces. Planting trees or creating communal gardens can be wonderful projects that not only beautify the area but also instigate sustainable living.
Support Local Businesses – Frequent local shops, cafes, and services to boost the neighborhood’s economy. Supporting local businesses fosters a self-sustaining community, often making it more attractive to future residents and other local entrepreneurs.
Volunteer and Offer Support – Whether it’s helping a neighbor with yard work or volunteering in local schools, your acts of kindness will ripple through the community, establishing a culture of support and assistance that enriches everyone’s lives.
Organize and Participate in Events – From block parties to garage sales, events can add vivacity to any neighborhood. They provide a platform for residents to mingle, forge friendships, and create cherished memories, threading a fabric of unity and camaraderie.
Respectful Living – Being mindful and considerate of your neighbors is foundational. Adhere to noise guidelines, maintain your property, and respect shared spaces. A culture of mutual respect enhances peaceful co-existence and cultivates a harmonious environment.
Advocate for Improvements – If you observe areas for improvement, like a need for better street lighting or safer playgrounds, take the initiative. Work with local authorities, attend town meetings, or organize petitions to facilitate beneficial changes.
In contributing towards shaping a great neighborhood, you’re not only enhancing your living experience but also elevating the quality of life for existing and future residents. Your active involvement, care, and initiatives sow the seeds for a community where everyone enjoys a sense of belonging, security, and joy in their daily lives. After all, the richest neighborhoods are those woven with the threads of unity, understanding, and collective effort. So, embrace your role and be the beacon that lights up your community with positivity and progress!
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