Tax Friendly Transaction

In most cases home sellers face no tax liability from their sale as long as the home has been their primary residence for at least two of the previous five years. Single taxpayers can exclude a profit of up to $250,000, and  taxpayers  filing joint returns can exclude a profit of up to $500,000. You can use this exclusion more than once in your lifetime as long as you haven’t taken the exclusion within the past two years for another house.

The IRS spells out certain cases in which you can take the exclusion on your profit, even if you haven’t owned your home for two of the past five years.  If you couldn’t live in the house because you’re divorced or your spouse died, or if you were deployed overseas by the military or by the U.S. Foreign Service, you may still be able to qualify for the full exclusion. A partial exclusion may be possible if your sale was due to a job loss or transfer, illness or because of other unforeseen circumstances, even if your family had a multiple birth (twins or triplets)!

If you’re certain that you’re not required to pay taxes on the sale  then you are not required to report the sale of your home on your federal tax return.

If you do have to pay taxes because the exclusions don’t apply your taxes will be based on the calculation of the sales price of the home, minus deductible closing costs, minus your basis. Some examples of deductible closing costs include the real estate broker’s commission, title insurance, legal fees, administrative costs and any inspection fees paid by you instead of the buyer.   The cost of home improvements done within 90 days of sale, made specifically  to sell your home, can  be deducted from your basis.

While these are some of the potential tax implications of selling your home, you should always consult your tax professional.

– Jon

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HOME SALES ON THE REBOUND

Existing-home sales are expected to finish the year at their highest pace since 2006, but accelerating growth and rising mortgage rates have the potential to slow sales, according to a recent economic forecast by Lawrence Yun, Chief Economist of the National Association of Realtors.

Yun said existing-home sales are measurably higher than a year ago, and strengthened in March as more buyers entered the market as the spring buying season got underway. “Sustained job growth and interest rates below 4 percent have been the catalyst behind the improvement in sales,” said Yun. “The demand for buying is especially strong in parts of the country where jobs gains and economic activity have outpaced the rest of the nation – particularly in states like Utah and Florida and cities such as Denver.”

Yun expects home sales to rebound and steadily improve to a pace of 5.3 million this year and 5.5 million in 2016 with prices rising to around 6% this year before moderating to 4 percent in 2016

– Jon

METRO HOME PRICES RISE

Stronger demand has caused home prices to rise in most metro areas during the first quarter of 2015.

The median existing single-family home price increased in 85 percent of measured markets.  One hundred forty eight metropolitan statistical areas (MSAs) out of 174 nationally showed gains in prices based on first quarter closing compared with a year earlier.

Lawrence Yun, NAR chief economist, says after moderating to healthier levels of growth at the end of 2014, prices picked up in several metro areas during the first quarter. “Sales activity to start the year was notably higher than a year ago, as steady hiring and low interest rates encouraged more buyers to enter the market.  However stronger demand without increasing supply led to faster price growth in many markets.”

The national median existing single-family home price during the first quarter was $205,200, up 7.4 percent from the same period last year. The most expensive housing market in the United States in the first quarter was San Jose California where the median existing single-family price was $900,000, followed by San Francisco at $748,300.  The least expensive metro market was Youngstown Ohio where the median single-family home price was $64,300.

According to Freddie Mac the interest rate on a 30 year mortgage remained below 4% at an average of 3.72% down from 3.97 percent during the fourth quarter of 2014.

– Jon

PENDING HOME SALES UP

Pending home sales in March continued their recent momentum, rising for the third straight month. according to the National Association of Realtors.  The forward-looking indicator based on contract signings, climbed 1.1 percent to 108.6 in March. The index has now increased year-over-year for seven consecutive months and is at its highest level since June 2013.

Lawrence Yun, NAR chief economist, says contract signings picked up in March as more buyers than usual entered this year’s competitive spring market. “Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year.” he said. “While contract activity being up convincingly compared to a year ago is certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year’s activity is being driven by more long-term homeowners.”

Pending home sales growth was greatest in the Western Region of the country rising 15.6 percent above last March.

– Jon