Thanks to Mom on Dealz for sharing her series, Ask an Accountant! Sharon is married to an experienced accountant. Although tax season is over, tax questions arise year round.
Question:
If you’re late filing your taxes and the government owes you a refund, are you penalized?
Answer:
You will not be charged if the IRS owes you a refund. They can assess a failure to file, or assess tax based on the information they receive (which is all income from reportable sources & limited deduction info) so the result will be a tax due.
Question:
Are there any tax penalties for selling your 1st personal home if you bought a 2nd personal home before the first one sold? (I’m afraid it’s going to be years before we finally get the first house sold)
Answer:
There is typically no tax on the sale of a primary residence as you are given a $250K exclusion (Single) or $500K exclusion (Married filing Jointly). If the gain (sales price less original cost plus improvements) exceeds the exclusion, then you will pay capital gains tax on the gain. You can own & deduct a primary & a secondary for tax purposes so this should not be an issue if the first does not sell immediately. The only issue I see here is if the original primary was a rental property after you bought the 2nd home. Then there is no exclusion & it is all capital gain.
*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.
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