Tax liability on home sale
Many tax experts as well as those connected with the real estate industry are cautioning home buyers to get reliable information on how to report tax liability on the sale of a personal residence.
In general, any profit on the sale of a personal residence is taxable unless the home seller purchases another personal replacement residence of equal or greater cost within 24 months.
On today's ''bargain'' market, real estate analysts point out, many seller/buyers are able to find adequate replacement homes at very reasonable prices - sometimes even for less moeny than the original personal residence sold for.
One way to defer tax payment on lesser-cost replacements, according to tax experts, is to add to the lesser-home purchase price the cost of any capital improvements made in the replacement residence within the 24-month span allowed.
If the purchase price plus the improvements add up to what the original home sold for, any tax liability is presumed to be deferrable.