capital gains tax on sale of home

Capital Gains Tax On Home Sale - What Are The Rules?

November 29, 2004
By Srinidhi Goenka

Selling your home is always an experience to remember. Whether you are selling it in order to make a profit or to compensate for some loss, it is always important to remember the taxman. There are several rules which govern the capital gains tax on a home sale. In most cases, it is possible to get some relief from the tax.

The rules which govern the capital gains tax on the sale of home are rather complicated. They can be quite confusing for the novice seller. It is important, however, to understand them in order to evade taxes in the best possible lawful manner.

To start with, if certain conditions are met, then there is no capital gains tax levied at all when you want to sell your home. These are explained herein :

· The house was bought only for residential purposes and not for any other use.

· It has always been used as your home only.

· The house was your only residence.

· It was used only for your residence, your family's residence and at the maximum, one lodger.

· The area covered by the house, including the garden, is no more than one and a quarter acres.

What If I Meet A Part Of The Above Conditions?
Even if you meet most of the above stated criteria, it is possible for you to get partial relief from tax. Some such situations are illustrated here :

· If you have more than one residential property, you can choose one to be your primary residence for taxation purposes.

· If you have met all the conditions except for the last 3 years of ownership, then you can still get full relief.

· If you have met all the conditions for some period of ownership, then you can still get some relief.

· If you have been living abroad for a few years, you might still be entitled to full relief.

· If a portion of your home was used for business purposes, it is possible to get some relief.

· Some relief is also possible if your home is a caravan or a houseboat.

· Lastly, partial relief can also be obtained if you have sold off a portion of your property but the main house is still yours.

Privacy Notice: We will collect no personal information about you when you visit its website unless you choose to provide that information. The only information we automatically collects is the visitor's Internet domain and Internet Protocol address, the type of browser and operating system used to access the site, the file visited and the time spent in each file, and the time and date of the visit.