Q: We have lived in our house for 34 years. When we sell it, will we have to pay capital gains tax? My husband thinks we will because his parents had to when they sold their house almost 40 years ago.
A: It’s been a few years since I touched on this topic, but it’s something everyone needs to know when selling their home. Before 1997, the history of capital gains tax was different and that was probably why your husbands parents had to pay. Today, most sellers do not have to pay capital gains tax. According to the IRS; you may be eligible to exclude from your income some or all of any gain from the sale of your principal residence (primary residence). (Your primary residence (primary residence) is where you live most of the time.) To claim the exclusion, you must meet the ownership and use criteria. This means that during the five-year period ending on the date of the sale, you must have: owned the home for at least two years (ownership test); lived in the accommodation as a primary residence (main residence) for at least two years (use test). If you had a gain from the sale of your primary residence (principal residence), you can exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases). If you can exclude the entire gain, you don’t need to report the sale on your tax return. If you have a gain that cannot be excluded, it is taxable.
With the new IRS rules of 1997, you can sell every other year with the above exclusions as long as you follow the IRS rules which have become more complicated. As I am not a tax adviser, I strongly recommend that you consult a tax professional on this subject. There is much, much more than what I mentioned, including the total base and the base adjustments that affect capital gains.
Q: I have seen on some house listings, in the remarks, the letters “IDRBNG”. What does it mean?
A: IDRBNG stands for “information believed to be reliable but not guaranteed”. Some agents use this as a form of risk management. They believe this will prevent legal action from occurring if any information is wrong on the list. However, lawyers I’ve consulted over the years say that doesn’t stop a lawsuit.
Market update: The January market update for the Macomb County and Oakland County housing market is as follows. In Macomb County, prices rose more than 3% and Oakland County prices also rose nearly 6% for the month. Inventories of residential houses/condos on the market have fallen again. Macomb County market inventory was down nearly 13% and Oakland County market inventory was down nearly 26%. Macomb County’s average days in market was 30 days and Oakland County’s average days in market was 33 days. Sales made in Macomb County were down more than 4% and sales made in Oakland County were down nearly 9%. Closed sales are down as a direct result of the continued low inventory. Demand is still high. We still average less than a month and a half’s supply of homes for sale; a 6 month supply is considered a balanced supply. (All comparisons are month-to-month, year-to-year.)
Steve Meyers is a real estate agent with RE/MAX Metropolitan in Shelby Twp. and is a member of the RE/MAX Hall of Fame. Contact him with questions at 586-997-5480 or [email protected] You can also visit his website: AnswersToRealEstateQuestions.com.