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Home Sale Rules for Newlyweds and Significant Others
Question: A spouse didn’t meet the residence test when the home sold because they weren’t legally married for two years on the date of the house sale. You indicated, however, the spouse is eligible for the home exclusion because by the end of the year they were married for two years Answer: If you want to understand how getting married impacts your ability to take tax-free profit, we must look at two issues and pass two tests. To take the full 121 exclusion deduction amount ($250,000/$500,000), first you have to determine filing status. If you were married or an RDP as of December 31, 2022, even if you did not live with your spouse/RDP at the end of 2022, your filing status is either Married Filing Joint or Married Filing Separate. Either way, the IRS considers you married for tax purposes. Now that you’ve determined that the client’s filing status is married, the potential gain exclusion is $500,000 under Section 121. But there are two important tests to apply to see whether you can exclude the maximum of $500,000 or whether it is going to be less. To learn about these tests, read on.
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CURRENT EDITION
2025 Tax Surprises You Shouldn’t Overlook
There are a few tax rules new for 2025 that may catch some individuals and their tax advisers by surprise. These changes have not received lots of attention either because they are overshadowed by related changes that are more significant, or they were enacted a few years back with a future effective date that arrives in 2025. This article covers changes for 2025 that you will want to be sure to share with clients to avoid surprises at a later date.
Leaving the United States, Part I: Expats
When Americans speak of leaving America, they generally are expressing a desire to live elsewhere in the world for cultural reasons or due to cost of living. These people are called expatriates, aka expats. For clarity, a mere visit to another country does not make you an expat. To be an expat, the move needs to be long-term and often includes working or retiring in the new country. Expats live somewhere outside the U.S., but still have a tax obligation to the U.S. and possibly the country they move to. That will be the focus of this article.
Tax Preparer Hit with Stiff Sentence
John Anthony Castro is a colorful character. He entered several Republican primaries seeking the Presidential slot after failing to win the primary for a Senate seat representing Texas. He sued to have our once and future President Donald Trump be removed from the ballot on Fourteenth Amendment Section 3 grounds. As we can easily infer, those suits went nowhere. But more than anything, John Anthony Castro was a tax guy with a virtual practice with locations in four cities. Not anymore. Now he is resident in a Bureau of Prisons facility – the Federal Medical Center Fort Worth. On October 30, 2024, Judge Terry Means sentenced Castro to 188 months in prison, followed by one year of supervised release and restitution of $277,243, following his conviction on 33 counts of “Aiding and Assisting in the Preparation and Presentation of a False and Fraudulent Return.” Does the sad story of John Anthony Castro hold any lessons for us? Perhaps.
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