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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.
Read MoreCURRENT EDITION
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Leaving the United States, Part III: Dual Citizenship
In Part I of this three-part series, we discussed the implications and taxes for American expatriates. In Part II we turned our attention to renouncing citizenship. Here in Part III, we will consider the halfway point of dual citizenship. And as you would expect, taxes are a serious consideration.
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Reflecting On Rothing
I have been dissatisfied with most of the articles that I have read about what I call Rothing, i.e. foregoing a deduction for retirement savings with the prospect of tax-free distributions in the future or taking the tax hit on a deferred account to convert it to a tax-free account. The articles generally have a pro-Roth bias. Suze Orman, for example, swears by Roths. They also tend to not have numbers in them. What I am going to do here is to reflect on the idea of Rothing and discuss what I see as some key numbers. I’m not going to dive deep into technical issues.
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Considering a Historic Building for Your Business? These Tax Credits are Good News
Historic buildings make a beautiful location for doing business. Unfortunately, many of them may seem out of the price range of small business owners. But, that’s not necessarily the case. The state and federal governments have an interest in preserving these properties, and they are willing to give you tax credits for buying and restoring a historic building. The credits reimburse a large proportion of your restoration costs. This really is a great incentive to go for a building that will give your company a unique and professional feel.
SIMPLIFIED TAX STRATEGIES &
PRACTICAL IMPLEMENTATION
Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
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