Tax Tips for Home Sellers

The IRS has recently issued a helpful list of 10 tax tips all homeowners should keep in mind when selling a home:

1. You are usually eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

4. If you can exclude all of the gain, you do not need to report the sale on your tax return.

5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.

6. You cannot deduct a loss from the sale of your main home.

7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.

8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

9. If you received the first-time homebuyer credit and within 36 months of the date of purchase the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year's tax return.

10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
For more information about selling your home, see IRS Publication 523, Selling Your Home.

Source: Inman News / Stephen Fishman (tax expert, attorney) 

Rekindling the Love Affair with your Home

5 ways to love your home again

If you've fallen out of love with your home, and you're committed to staying put for years to come, it is a worthwhile endeavor to rekindle that romance, and re-excite the spark that makes coming home, being home, maintaining home, and even writing out the checks that keep the lights on, the mortgage paid and the taxes current, a blessing. Here's how:

1. Spend time in someone else's home. Make more of an effort than you might otherwise to accept your pals' barbecue and dinner party invites. Go on those home and garden tours that are put on locally. When you travel, consider renting someone else's home (or part of it) on a site like or, rather than just getting a hotel room.
And pay attention to the homes' locations, comfort level, amenities, decor and nice touches, or lack thereof. I assure you, one of two things will happen: If you love their space, you'll leave inspired to make tweaks to yours; if you don't love it, you'll be super-grateful for your home, just as it is.
2. Get out of your comfort zone and routine. Following the theme of inspiration and gratitude, seek out experiences entirely outside of your comfort zone. The further outside your comfort zone, the better. Take a trip to a destination unlike the places you normally vacation; if you live in the city, go stay on a working farm. And if you don't have time to take a whole trip, just spend a couple of hours in a part of town that you don't normally go to, or spend an afternoon doing something you've never done before: Take a workshop, go for a hike or take a tour. If you drive, take the bus. If you're always checking your phone, lock it in the trunk of your car for a whole weekend. If you eat out, cook -- and vice versa.
When you have experiences that jolt you completely out of your sense of the norm, it resets your brain in a way that allows you to come home and see things that are familiar in a very different light.
3. Inventory and fix any little glitches. It's easy to get caught up in the day-to-day duties of living and working and raising a family. As time goes on and little things at home break or need repair, many of us fall into the habit of putting them on a list that never gets done. Over time, as the list of doors that creak and handles you have to jiggle grows longer and longer, that can create doldrums and annoyance, as you have to deal with these little glitches on a daily basis and it starts to feel like 'broken' is the normal state of affairs at home.
Once I no longer had little kids on a constant demolition path through my own home, I almost instantly fell back in love with it, in part, by taking meticulous care to log and have fixed any and everything that wasn't working exactly as it should. It's a never-ending battle, mind you; if you keep on living in a home, things will continue to wear out or break, so I have a handyman on call to constantly tend to my ongoing list. And every time I have him fix a wonky cabinet or touch up the wall with the scuffed paint, I am reminded of just how much I love my home.
4. Have a Financial Health Day. Many times, financial hemorrhages and simply feeling like your home is disproportionately draining your bank account can create resentment and anxiety that gets in the way of feeling warm and fuzzy about owning it. Now, every mortgage or home-related financial problem might not be within your power to fix, but rather than letting things spiral without doing anything, the next time you take a personal day off from work, set aside some time to do a deep dive into your home-related financials.
Set an appointment with your mortgage broker to discuss refinancing, if appropriate. Appeal your home's property tax assessment, if you believe it's too high. Check to see if recent increases in your home's value will qualify you to have the private mortgage insurance removed from your mortgage. Figure out what side business or job you can do to pay down your consumer debt or help get you out of the stresses of paycheck-to-paycheck living.
5. Make peace with long-ago compromises. I've met people who have lived in homes for decades, who still have pent-up resentments and anger about compromises they made with their spouse or co-buyer during the house hunt. And that's a terrible way to live, because you spend so much time and money at and on your home -- if you feel that way, you essentially live with a major emotional dissonance. This can also create a grave rift in relationships, as the disgruntled party might wield the fact that she acquiesced on such a big item as a weapon of martyrdom or victimhood.

Source:  Tara-Nicholle Nelson / Inman News

How to Rebound from Setbacks

Today I'm including a book review that is from a business standpoint that can also be helpful to anyone no matter what your field. The review is done by Tara-Nicholle Nelson from Inman News.
Markets crash. People die. Scary diagnoses are issued. Jobs are lost. Homes are lost. And for many Americans, it feels like the last few years have hit them with more than their fair share of these sorts of traumas, proving true the adage, "When it rains, it pours."

I've certainly been through a number of my own, personal worst-case scenarios, but have come out the other side with a vastly expanded understanding of my own inner resources and a great appreciation for life's possibilities.

Once you prove to yourself what you're really made of, as often happens in recovery from a crisis, you take that confidence, that knowledge and those problem-solving skills with you as you face life's incessant stream of incoming challenges.

That's resilience... And this quality -- resilience -- is precisely the subject of U.S. News and World Report journalist Rick Newman's new, hopeful and useful book, "Rebounders: How Winners Pivot From Setback to Success."

The book starts out with Newman's own transparent tale of his own life, family, financial and career struggles in the aftermath of his divorce, just as the traditional newspaper industry was being derailed by the advent of online news -- and the takeaways he gleaned from the experience, including that hard work doesn't always pay off without a strategic plan also in place.

But the meat of "Rebounders" is a series of detailed stories of figures in business, politics, philanthropy and culture -- stories of rebounders who experienced and recovered from all manner of devastating failures and traumatic disasters on their paths to achieving an assortment of heroics, from becoming our national heroes, like Ben Franklin and Thomas Jefferson, to helming companies such as Pandora and Netflix.

Newman vividly tells these stories, then deftly uses them to surface dozens of nuanced insights with the power to spark and call forth the individual flavor of resilience within every reader. That said, there are also some overarching themes around what it takes to be resilient that Newman sets out at the very start. Here are the four most pervasive insights he provides:

1. "Setbacks can be a secret weapon." Newman relates that the unanimous message of his interview and research subjects was that the lessons and skills they had acquired in the process of overcoming their setbacks were much more pivotal to their success than the moments when everything finally came together. In fact, in providing the precise definition of resilience, Newman points to the strength, smarts and durability that develop in the process of pushing past fear, failures and "quit points."

2. "Small adversities matter, just like big ones." Small disappointments and frictions, like getting stuck in traffic or having a chronic, but relatively mild, illness, can seem unworthy of our attention especially when compared to all the tragedies and chaos we witness on news reports. However, Newman argues that we can harness small failures and dramas to build our resilience muscles, giving ourselves what he calls a "stress inoculation" that will allow us to recover from much larger life upsets whenever they do inevitably arise.

3. "We're all addicted to alluring shortcuts and incomplete slogans." Newman points to example after example in which people get or stay on the wrong, failure-prone course because of their belief in pithy, partly true, but incomplete motivational slogans like "Do what you love, and the money will come." He points out that there are potential pitfalls to this reasoning, like that the work you love might be work many people love, rendering the field an uber-competitive one in which to make a living. Ultimately, these magical slogans are simply not enough to point you in the direction of success.

4. "Optimism is overrated." Optimism lives in the same bucket, in Newman's book, as these incomplete slogans, in that they both oversimplify what it will really take for most people to find success. Newman suggests that you trade both the slogans and overconfidence or optimism in for a strategic action plan that accounts, in advance, for pitfalls that are likely to be encountered, and is both heavy on the problem solving and flexible enough to allow for the adaptation and course correction you may need to do if things don't work as planned.

In this vein, Newman advocates something called "defensive pessimism," in which you envision your worst-case scenarios and prepare for them, in advance. Ultimately, this point of view is empowering and even calming, as it results in complete preparedness and, fortunately, our worst-case scenarios don't actually materialize the vast majority of the time.

What You Should Consider Before Taking out a Reverse Mortgage

Approximately one-third of all Americans own their homes free and clear. Nevertheless, many seniors can end up losing their homes because they don't have the money to pay their property taxes, or they get hit with high medical bills or encounter a situation in which they need the equity from their home but can't qualify for a loan.

For many, a reverse mortgage may be a great way to avoid losing their home.
Over the last few years, reverse mortgages have gained a somewhat negative reputation in the real estate community. In some circumstances, however, these can be a tremendous blessing to seniors who may be at risk of losing their homes.

How reverse mortgages work

"A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM (home equity conversion mortgage) borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.
"You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

"To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home."

You could choose to receive your payout as a lump sum, a lifetime monthly payment, a monthly payment for a limited term, a line of credit, or a combination. You would never owe more than the value of the home, regardless of the amount paid out.

Reverse mortgages require points and fees, which often run about 5 percent of the property value. On a $400,000 property, that's $20,000. The homeowner must occupy the property as his or her primary residence. If the homeowner becomes ill and is away from the home for more than 365 days, the reverse mortgage becomes due and/or the property must be sold.

When the homeowner dies, the property goes to the lender upon the death of the borrower. In some cases, the property may be sold, provided that both the interest and principal paid by the lender can be reimbursed. If this is the case, then the balance could go to the deceased's estate. As a rule of thumb, the younger the borrower is (minimum age is 62), the smaller any monthly payment would be. For more information on reverse mortgages, visit the Federal Trade Commission website.

A reverse mortgage retirement plan: reality or pipe dream?
I recently had a conversation with one of my former colleagues from Southern California who is eagerly awaiting his 62nd birthday so he can get a reverse mortgage. He is a sophisticated investor who has owned (and lost) multiple properties over the years. His game plan for retirement is to do what most investors love to do: work with someone else's money. Here's what his plan is:

1. When he turns 62, he will purchase a four-unit building where he will put 40 percent down, owner-occupy one unit, and rent out the other three units.
2. He will then obtain a reverse mortgage, which he will use to pay down the principal as rapidly as possible.
The result: The reverse mortgage refunds his down payment each month while he collects the cash flow from the building. If he lives long enough, he has paid zero for the property since the rents and reverse mortgage will cover the cost of the property plus covering all his living expenses. Since he has no heirs, he's not concerned about what happens after he dies. While all of this sounds great, there are a host of issues that this individual is not taking into consideration that could spell disaster.

1. Is the mortgage lender reputable?
HUD/FHA is one of the legitimate reverse mortgage lenders. It's important to verify that any reverse mortgage lender the borrower uses is reputable.
2. Lump sum payments can be dangerous.
A report by the Consumer Financial Protection Bureau found that about 70 percent of all borrowers elect a lump sum payment, oftentimes to handle bills or other emergencies. The challenge is that once the money is gone, the reverse mortgage continues to deplete the borrower's remaining equity. The result is that if the owners are unable to keep up with property tax increases or their insurance, they can still lose their home.

In fact, the report says that about 10 percent of all homeowners with a reverse mortgage are now facing foreclosure, largely due to the fact that they took lump sum payments. Part of the reason so many people take this option is that the lump sum payment (at least for the HUD/FHA product) is at a fixed rate, while the monthly payment option is at an adjustable rate.

3. A little-known dirty secret.
In many cases where people have remarried, the house may be in one person's name. In that case, if the person who is on the mortgage dies, the surviving spouse could be evicted from the property.
The bottom line is that reverse mortgages can be a tool to help an owner stay in his property, but they should be considered more as a last resort when all other options have been exhausted.
Source: Bernice Ross, CEO of, and author of the National Association of REALTORS®' No. 1 best-seller, "Real Estate Dough: Your Recipe for Real Estate Success."