Four Steps to Save Taxes on Selling a House in the US: Step 1

Four Steps to Save Taxes on Selling a House in the US：STEP 1

Today, we'll reveal four ways to sell your house in the US with NO TAX. However, each method has strict conditions; one wrong step could lead to a huge tax bill. Ready?!

Step 1:

Selling your primary residence entitles you to certain tax exemptions. If you own the property alone, you're exempt from $250,000 in profits; if a married couple files jointly, the exemption is $500,000. To receive these exemptions, remember to meet the following three conditions:

Condition 1: The "Ownership Test".

You must have owned the house for at least two years within the five years prior to the sale.

Condition 2: The "Use Test".

The house must have been your primary residence for at least two years within the five years prior to the sale. These two years don't need to be consecutive; proving you lived there is simple. For example, your bank mail address or utility bills in your name are sufficient.

Condition 3: The "Lookback Test"

You cannot have used this tax exemption within the two years prior to selling this house.

In other words, to prevent you from owning multiple properties and exploiting the IRS to claim this tax exemption, it can only be used once every two years. Let's say you bought a house in 2018 for $500,000, meeting the above three conditions, and then sold it in 2024 for $800,000. The profit is $300,000. If you are married, this $300,000 profit is completely tax-free. However, if you are single, only $250,000 is tax-free; you only need to pay tax on the $50,000 exceeding $250,000. Fortunately, this $50,000 is taxed under the "Long-Term Capitalization Tax."

For Step two, three, and four, please stay tuned... to be continued...!