As we move at warp speed to and through retirement age, many of our baby boomer generation are downsizing to smaller homes, or relocating to warmer climates.

If you’re like me, the time is drawing near when my spouse and I will trade in the lawnmower, snow shovel, 3-bedrooms and 2.5-baths, for a more manageable retirement condominium surrounded by palm trees.

Before sticking a “For Sale” sign in the front yard there is one other party you might need to consider, our dear old Uncle Sam.

Fortunately, for most of us, when it comes to the tax man real estate sales aren’t nearly as painful as they used to be.

The last time I sold a home a litany of rules and regulations determined if I owed tax. Now, for all but the wealthiest among us, the tax code on the sale of a primary residence is fairly straightforward.

Here is a brief summary.

Single Taxpayers

You can claim a tax exemption for up to $250,000 profit provided:

A) You owned and lived in the house as your principal residence any two of the last five years.

B) You have not claimed the exemption on another home sale in the past two years.

Married Taxpayers Filing Jointly

You can claim a tax exemption for up to $500,000 profit provided:

A) You or your spouse owned the home, and you both lived in the house as a principal residence any two of the last five years.

B) Neither you nor your spouse has claimed the exemption on another home sale in the past two years.

In both scenarios, a home sale profit exceeding the exemption is taxed as a capital gain.

There are a few special circumstances for widowed or divorced taxpayers, and for those who postponed gains on home sales in 1997 and earlier.

The good folks at TurboTax (my favorite tax software) have provided a much more detailed explanation of special circumstances. It is available HERE.

I hope you found this brief explanation helpful. I know I was relieved to discover my least favorite uncle didn’t want a piece of my hard-earned home equity.

Here’s to baby boomers, sunny days, palm trees, and rum drinks!

The Editors

BoomersKnowHow.com

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