Are considering the sale of your principal residence? You probably know that you will be able to exclude up to $250,000 of gain ($500,000 for most joint filers). IRS regulations may now allow you to apply this gain exclusion when you sell vacant land that is adjacent to your home.
To qualify for the tax savings:
- The land you sell must be adjacent to the parcel on which your house sits.
- The land sale must occur within two years before or after the residence is sold.
- You must meet the other usual requirements for claiming the exclusion.
Here’s how it works:
Example: You own a house and 10 acres of property. The home is your principal residence. When it’s time to sell, you decide to divide the property. The house will be sold on a three-acre lot, and the other seven acres of land will be offered to a developer. If the land sale occurs within two years before or after you sell the house, you can exclude up to $250,000 ($500,000 if you file jointly) of the combined gain from both sales.
Charles P Myrick CPA , Washington DC tax preparation firm, provides accounting and bookkeeping services to clients throughout the area. Contact us to find our more about our tax planning and tax preparation services.
Note: Originally published 2014-07-17.