Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.
12-05-2017 01:07 PM
I am in the process of selling my home in NJ. I live in NC. What do I need to be aware of as far as filing taxes? How much should I save to pay taxes? Is it to my advantage to sell at the end of the year or wait until the new year?
12-05-2017 05:27 PM
Welcome to the H&R Block community.
You might not have to pay taxes on the federal level at all if you meet certain criteria. If you lived in the home for at least two out of the last five years, and if you owned the home for at least two out of the last five years, and if you haven't taken an exemption from taxable gain on the sale of a home in the past two years, then your first $250,000 worth of gain is exempt from being taxed ($500,000 if MFJ). This is at the federal level.
On your state returns you may or may not be able to claim an exemption. Most states follow the federal rules or are similar, however you may want to check your state department of revenue website for further details for your specific state.
Because the home is in New Jersey, you will have non-resident NJ income, so you will have to file a NJ tax return for the year in which the home is sold. You will also have to report the capital gain on your NC tax return because all income from all sources derived must be reported to your state of residence. However, you can take a credit on your North Carolina tax return for tax paid to NJ though. The only way this would be different is if there was a reciprocity agreement between the two states, but there isn't one here.
Note that on the federal level, if the tax bill passes the full Congress and becomes law, the requirements for the exclusion of gain will change to five years rather than two.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)