Capital gains tax when you sell your home

Will you owe income taxes when you sell your home in New Jersey?

Capital gains tax is tied to how long you have owned your home and how long you  have lived in it.

The following question was asked and answered NJMoneyHelp.com

Q. I bought a house in December 2016 and I expect to sell it in June 2020 for $745,000. I’m moving to North Carolina for a job. The exemptions for the exit tax confuse me, including the line that says “you must have used the home that was sold as your primary residence for two out of the last five years.” I haven’t had the home that long, and I file taxes married filing jointly.
— Moving

A. Congratulations on the new job.

On your move, taxwise, you should be okay.

The State of New Jersey follows the federal government when it comes to the sale on a home.

Internal Revenue Code Section 121 gives an exclusion of up to $250,000 of capital gain from the sale of your main home or $500,000 if your filing status is married filing jointly, said Cynthia Fusillo, a certified public accountant with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

There are two tests to qualify, she said. One is for ownership and the other is for use.

“You must have owned your home, and used it as your main home, for a period totaling at least two of the most recent five years immediately prior to the sale date,” Fusillo said. “Based on the fact pattern you provided, you should be eligible to exclude the expected gain on the sale of your home.”

She said you will have to report the sale on your tax return for the year of sale based upon the expected sale price.

However, the resulting gain, if falling within the $250,000/$500,000 parameters, will not be taxed, she said.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published on March 12, 2020.

Remember to always seek advice from a personal professional tax and legal advisor who understands your unique individual circumstances.

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