Special Home Tax Exemptions for Massachusetts Home Sales

The Primary Home Sale Tax Break Exemption

To qualify, the home must have been your primary residence for at least two out of the five years before the sale. These don’t have to be consecutive years.

Both the IRS and Massachusetts are in sync on this one and offer a significant tax break called the Home Sale Exclusion, which allows single filers to exclude up to $250,000 of the gain from the sale of a primary residence, while married couples filing jointly can exclude up to $500,000.

Suspension of the Five-year Test Period for Military, Foreign Service or Intelligence Personnel

If you or your spouse serve in the Uniformed Services, Foreign Service, or intelligence community on qualified extended duty, you can pause the five-year test for up to 10 years. This applies if you’re stationed 50+ miles from home or living in government housing for over 90 days.

Refer to IRS Publication 523 for more information about this special rule to suspend the 5-year test.

Special Home Sale Tax Breaks for Divorce

Please refer to the turbo tax page at: https://turbotax.intuit.com/tax-tips/marriage/getting-divorced/L20NC66cf

Special Home Sale Tax Rules for Job Transfers

If you moved over 50 miles due to a job transfer the following special rules may apply to you:

If you only lived in the home for 1 year before selling and the gain was $100,000, you could still potentially exclude a portion of that gain.
If you lived in the home for 1.5 years, you might be able to exclude 75% of the eligible gain (based on your 1.5 years out of the required 2 years). Consult a qualified tax advisor regarding your specific circumstances.

Special Home Sale Rules for Widows or Widowers

Widows or widowers who sell within two years may not have to pay any capital gains tax on the sale of the home. Check with a tax pro to be sure or call us to discuss timing and a referral to a tax professional.

There is also an excellent article with lots of details at:
https://www.covenantwealthadvisors.com/post/tax-consequences-of-selling-a-house-after-the-death-of-a-spouse

Special Home Sale Tax Rules for Inherited Homes

When you inherit property, you get a “step-up” of the property’s value. This means that the home’s value is adjusted to its market value at the time of the original owner’s death.

This can greatly lower your capital gains taxes when selling, especially if the home’s value has increased since the original owner’s passing.

That is why it is important to get a credible written value opinion, as of the date of death, from an experienced and trustworthy source.

One of our specialties at Greater Boston Home Team is helping with estate sales. We have an entire team in place to make dealing with an estate sale easy and as profitable as possible. Feel free to schedule a free consultation at www.TimeWithSam.com to learn about the next steps and how we can help.

Special Property Sale Tax Rules for Installment Sales

When you sell your home and receive payments over multiple years, that’s called an installment sale.
This method allows you to spread your taxable gain over the years you receive the payments, unless you opt out and report the full gain upfront.

Even with an installment sale, you may still qualify for the capital gains exclusion under Section 121.
For more information about installment sales, see IRS Publication 537, Installment Sales, Form 6252, Installment Sale Income, and Topic no. 705, Installment sales .

Disclaimer: This information comes from reliable sources but may contain errors or omissions and may or may not apply to your specific situation. Schedule a free call at www.TimeWithSam.com to discuss your next steps and get connected to a trusted tax advisor.