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Video instructions and help with filling out and completing Can Form 4797 Guidelines

Instructions and Help about Can Form 4797 Guidelines

Hey guys, Toby Math here with interesting business advice. A question I get quite often is what to do when I sell my house to make sure that I pay no tax, and that's a pretty easy one. There's something called a 121 exclusion, which most people know. You have to have lived in the house for 24 of the previous 60 months prior to selling it, and you have to pass the ownership test. You have to own it when you sell it. So, in English, that means if I lived in the house as my primary residence or personal residence, and I had 24 months during that period of time, I could qualify for a $250,000 exclusion against the capital gains, not depreciation recapture. That's important. Against the gain on the home. Or if I'm married or filing jointly, it's $500,000. So that's a big, huge capital gains exclusion that you definitely want to capture. Now, here's what sometimes happens: somebody purchases a house, the real estate market runs up over the years, maybe they've been in it for 15 years, 20 years, and they want to sell it and go move someplace else. And they say, "Hey, how do I avoid the gain?" Sometimes they'll have a twist. They say, "What if I want to keep it and I want to make it into a rental? Then what do I do?" And most of the time, practitioners are gonna say yes. They just left a ton of money on the counter there and they passed up the chance to use their 121 exclusion. Here's why: that 24 of 60 month rule applies before you sell it. You have to be the owner and you have to have lived in it for 24 months out of 60. But if...