Thanks to relatively generous federal income tax home sale exclusion, you can pocket up to a half a million dollars tax-free from the sale of your home.
Here is the potential problem: It still might not be enough to cover all your tax liability on a home sale if the place has appreciated significantly since you bought it. You may have to pay a huge tax on the sale of your house. Here is the strategy: Keep detailed records of home improvements. These expenditures increase your tax basis for home sale purposes. So, when you finally do sell your home, the higher basis reduces the taxable amount of the gain—if any. Without detailed records, you’re just taking a shot in the dark at your actual basis. Make sure you document qualified expenses from year to year.[/vc_column_text][us_image image=”3422″][/vc_column][/vc_row]