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A Commonly Missed Tax Break

Did you know that if you reside in a condominium or cooperative that upgrades to the common areas can affect the amount of tax you pay when the home is sold?

If the property is your principal residence and you have lived in it for two of the previous five years before the sale, you probably already know that a big chunk of the profit is already exempt from federal tax ($250,000 for a single person and $500,000 for a married couple.

If your gain has grown above that number, you will owe taxes on any profit beyond that. If the property is not your primary residence, you will owe taxes on the whole amount (Unless it's a income property and you perform a 1031 Exchange).

For those who reside in a condominium or cooperative, a proportional share of the amounts spent by the condo or cooperative association on improvements to the property (not maintenance) can be added back into the the basis price of the property. The basis is subtracted from the sales price to determine any taxable profit, so the higher the basis, the lower your potential tax.

As always, consult your tax adviser, as everyone has different scenarios.

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Steve Hardy
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Direct Fax: 866.466.4019
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