Whether it’s a lakefront cottage or a log cabin in the woods, a vacation home often seems to be a dream that only the wealthy can afford, but these days, you don’t have to be a millionaire to own one.
If you have owned and lived in your principal residence for two out of the five years before it is sold, up to $500,000 of any profit can be excluded from federal capital gains tax if you are married and file jointly. (It's $250,000 for taxpayers who are single or married filing separately.)
This is known as the "use and ownership" test.
Use does not have to be continuous. As long as you can prove that you have lived in the house for two full years, that will satisfy the Internal Revenue Service. And you do not have to live in the house every day. It does not void your use claim if you take a vacation or even move to the beach for a couple of weeks every summer.
Additional linkThe old adage that “timing is everything” especially applies to buying a new home. And trying to be at the right house at the right time and get it for the right price can be tricky. Here are some guidelines to assist you:
Purchasing a home can be a complicated and confusing process, especially for first-time buyers. Throughout the process, first-time home buyers will encounter a variety of unfamiliar real state terms. There are several key terms associates with purchasing real estate that are helpful to learn. For example, many buyers confuse the terms broker and salesperson.
