Saturday, January 6, 2007

Tax on Sale of Home with Home Office*

* If you claimed a home office deduction and sold your home you may owe taxes.*

If you sell your home you may get an exclusion from taxation on the sale, but not if you have claimed deductions for a home office. there is a recapture of depreciation that may require that a part of your profit is taxable. I don't have a picture of my old home, but the above is a picture of my present home, in which I also have a home office.

Here is an excel worksheet that will enable you to calculate the taxable gain if any if you sell a home on which you have claimed a home office deduction:
Of course, you would not owe anything if you sold your home at a loss.

When I sold my previous home, I was a little concerned with this, but after I reported the gain, the other home office deductions more than offset the recaptured depreciation on which I had to report as a taxable gain. If it had been depreciated for 20 or 30 years, it might have cost me, but I had moved from Dallas to Midlothian (Ellis County) and then moved after about 10 years.

Speaking of Ellis County, Jim Pitts, is the Ellis County State Representative in the Texas Legislature-- and is running for speaker of the house. Jim is a really good guy and I hope he wins.
After my daughter had just graduated from Law School, and was still unemployed, we went to Jim's house for a political event, and he asked if she had found a job yet. She told him she had applied for a job as a DWI procecutor with the State. Jim then told her he would write a letter of recommendation. He wrote it and she got the job which gave her a start in her legal career. She is now with a law firm in Dallas.

PUBLICATION 17, Your Federal Income Tax - This publication is a reference book covering most subjects involved in preparing Form 1040

Car Expense-- Pub 334,463 and 535
Sale of Principal Residence-- Pubs 523 and IRC § 121
Sec 179 write-offs for SUVs and other equipment-- Form 4562, Pub 946, IRC §167
Office in Home--- Form 8829, Pub 587
Mutual Fund -- phantom profits, reinvested dividends:-- Pub 550 and 564
Alternative Minimum Tax --- Pub 929 (individuals) Pub 542 (corporations)
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This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.

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