You spent a lot of time and money purchasing your home, but once you are in it, you decide that it is not quite what you want. Whether you need to move for a job or you just do not like the home and want to go with something else, you may wonder how long you need to own the home before you can sell.
Elizabeth Leanza of Realty One Group, an experienced group of realtors in Franklin, Tennessee, explains that homeowners can sell their home whenever they want after they make the purchase. You may not make much of a profit if you sell the home too soon, but homeowners can choose to make the sale as soon as they want. It is recommended that homeowners wait at least two years to help the home increase in value and avoid paying capital gains taxes.
Let’s take a closer look at how long you should own your home before selling so you can keep more of the money in your pocket.
How Long Do You Have to Own a House Before Selling?
Homeowners can sell their homes whenever they want after the purchase is complete. If you decide that you are sick of the home after six months, you can put it back on the market and sell it again.
It is not likely that you will earn your money back in that amount of time unless you did a lot of big repairs and got a great deal on the home, but it is possible to do.
Most experts recommend that the homeowner stays in the home for a minimum of two years. This gives the home time to increase in value and the homeowner will make payments that help to lower the principal on the mortgage as well.
If the homeowner tries to sell the home before they have lived in it for two years, then they may have to pay capital gains taxes.
You can sell the home in less than a year and avoid these taxes as well. It will depend on how much you make on the home. If you sell your primary residence after a year or less and earn less than $250,000 as a single individual or $500,000 as married filing jointly, then you will not need to pay the capital gains taxes.
You can only get this exemption once every two years though. If you sell this home and make $225,000 as a single filer after a year, you will need to hold onto the next home for more than a year or make less than $25,000 on the sale. If you make more than that or sell too many homes, you will need to pay taxes on the amount.
If you purchase a home and stay in it for a long time, then you will not need to worry about the capital gains taxes. You can live in it for ten years and make a good amount of money. But as long as you were the one living in it, rather than renting it out to someone else, you will be able to take the profit and be fine.
Why are Capital Gains Taxes Taken From the Sale of the Home?
The idea here is to prevent homeowners from claiming the home as a primary residence and then flipping homes without paying taxes. If you are making a large amount on selling your home in less than two years, or you sell several homes and the profits add up to a larger amount in a few years, then it looks like you are turning this into a business and you need to pay taxes on it.
If you stay in the home for at least two years or more, you will be able to prove that it is a place you use as a personal residence.
You are not trying to flip homes to make money, even if you do make a profit on this home, so the capital gains tax will not be taken against you. You must live in the home for at least two years to avoid worrying about the capital gains taxes at all.
If you are worried about this tax, you should talk with a real estate agent or your financial advisor, and your tax planner ahead of time. They can provide you with information on how much you can make on the sale of the home and you can then determine whether you should stay in the home for longer or if it is time to sell and take the profits.
Choosing to Sell Your Home
There are different reasons why someone will choose to sell their home and take the profits. You can technically sell the home at any time that you want, but you need to balance the capital gains taxes if you make too much and you need to consider how much you will actually make if you sell the home too soon. Balancing your options and considering the options that are available will help you know when you should sell your home.