Most siblings do not have to pay federal taxes on the sale of their jointly owned house unless they are married (yeech!) to each other.
DEAR MR. MYERS: My sister and I are selling the home we purchased and have shared together for seven years. We bought the house when the real estate market was crummy. Now prices have jumped up, and we expect to make about $85,000 each from the sale. How will our profit be taxed? Will we have to pay taxes to the IRS because we are not a married couple and file our income-tax returns separately?
ANSWER: There’s no reason to worry. Internal Revenue Code 121 allows married couples who file their taxes together to keep up to $500,000 in their home-sale profit tax-free, provided that they have lived in the house for at least two of the previous five years. Single tax-filers (like you and your sister) who meet the two-out-of-five-years test can each keep up to $250,000 away from the clutches of the IRS.
The $85,000 profit that each of you expects to make falls well short of those limits, so you probably won’t owe any federal taxes at all on the sale.
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Talk to an accountant or other tax expert for more details. Also get a free copy of IRS Publication 523, “Selling Your Home,” by calling the agency’s toll-free hotline (800-829-3676) or by downloading it on your computer from irs.gov.
DEAR MR. MYERS: Hey, Dave, what should I buy in January?
ANSWER: January is a great time to buy widescreen televisions, shopping experts say, as retailers try to unload their unsold holiday inventory and clear space for new models that were unveiled at the giant Consumer Electronics Show earlier this month. Look for savings of 25 percent or more in the next few weeks, which will give you plenty of time to install the new TV before Super Bowl 50 on Feb. 7.
If you made a New Year’s resolution to get in shape and lose weight, now is the time to buy a treadmill or other in-home gym equipment. Retailers are already offering huge discounts on such items, in part because they know that sales will drop in the coming months as many Americans simply “give up” on the fitness oaths that they made to themselves on New Year’s Eve.
Though it might be hard for many folks to think of the summer when their teeth are chattering from the mid-winter cold today, it’s a sure bet that the weather will warm in the months ahead. So, it’s a good time to buy a wall-unit air-conditioner or even a simple fan, before demand heats up later. Find discounts that can top 30 percent now at big-box chains that include Home Depot and Lowe’s, as well as at online retailers such as Newegg.com, said shopping expert Brian Hoyt of bargain-hunting website RetailMeNot.com.
January also rings in the start of the traditional “white sales” season, when bedroom, bath and even kitchen linens go on sale at discounts of 30 percent or more. “Unlike holiday discounts on mid-level quality linen, January white sales bring some of the biggest discounts of the year on both lower- and higher-quality sheets, towels and other textile-related items for the home,” said Brent Shelton, an online shopping pro at FatWallet.com.
REAL ESTATE TRIVIA: John Wanamaker, founder of one of the nation’s first department stores, is believed to be the creator of the “white sale” in 1878. He discounted prices on thin bed linens, which only came in white back then, because they didn’t sell very well in Philadelphia’s chilly winter months.
DEAR MR. MYERS: Can my neighbor keep the Christmas lights on her roof all year long, even if they aren’t turned on? They look really cheesy, especially when the summer comes!
ANSWER: It depends on where you live.
If your home is in a development that’s governed by a homeowners association, the HOA’s rules likely decide when holiday lights can go up and when they must come down.
Most cities and counties, though, don’t have such rules or laws. That means the Christmas lights can stay up 365 days a year.
There are a few exceptions. In San Diego, for example, all holiday lights must be removed by Feb. 2. Violators can be hit with a $250 fine.
Despite some widely spread press and Internet reports over the years, Maine does not have a law that orders holiday lights and decorations to be removed by Jan. 14, said Sue Wright, a reference librarian at the legislative law library in the Pine Tree State’s capitol of Augusta.
David W. Myers’ column is distributed by Cowles Syndicate Inc.