Excluding the Sale of Main Home From Seller’s Income

From My Point of View:

Excluding the Sale of Main Home From Seller’s Income

                                                            By Dan E. Nino, CTEC/CRTP

For many years that I’ve been preparing income taxes, aside from sales tax and tax filing for non-profit organizations, I found out that I learn something every day. Every tax return is different from each other. The circumstances, the status of tax filers, their gross income, adjusted gross income, tax deductibility, tax exclusions, dependents, etc. are taken into account.

But  one aspect of the taxation that I found very interesting is the sale of a main home by divorcing owners. As well all know, divorce is a contentious matter. But I was able to assist my client’s tax return to her satisfaction into a win-win situation.

There are also times that I serve as personal counselor because they tell me their personal problems. I can’t just ignore their sob stories because I don’t want to appear rude and dismissive.  

Anyway, according to federal tax laws, a taxpayer may qualify to exclude from their income all or part of any gain from the sale of their main home. A main home is the one in which the taxpayers live most of the time.        

I found out that closing costs or expenses in selling a main home are example of exclusions or items that are not required to be included as gross income.

Fifty percent of the net proceeds directly associated from the sale of a main home should be given each to the divorcing couple. Expenses incurred in the sale of the main house should be equally divided by the sellers or divorcing couples as exclusions when one files his/her income tax return like real estate agent’s commissions, legal fees, escrow charges, County Transfer Tax, Escrow Fees, Document fees, Loan Payoff, Notary Fees, miscellaneous payoff charges, and other costs or fees paid in order to sell the home. 

For the federal side, just fill out the Sale of a Main Home Worksheet in the Schedule D, Other Menu to see if any of the capital gain from the sale of their main home can be excluded.

Generally, if a taxpayer meets the following tests, they can exclude up to $250,000 if filing single or  ($500,000 if married and filing a joint return) of the gain from the sale of a main home.

The taxpayer must have owned and lived in the home for at least 2 out of the last 5 years leading up to the sale of the home and must satisfy the ownership test and residence test.

The required two years of ownership and residency during the five-year period ending on the date of the sale do not have to be continuous nor do they have to occur at the same time.  A taxpayer meets the tests if they can show that they owned and lived in the property as their main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale.

Here are the frequently asked questions as proffered by the IRS in determining if a taxpayer qualifies to exclude all or part of the gain from the sale of their main home. Refer to IRS Publication 523, the section entitled “Does Your Home Sale Qualify for the Exclusion of Gain?

The sale of a main home must be reported on the taxpayer’s federal income tax return if any of the following apply:

• There is a taxable gain on the sale of the home
• The taxpayer elects to report a gain that is eligible for the exclusion
• Reporting a Loss:  A loss from the sale of the taxpayer’s main home can not be deducted from income on the tax return.

More Than One Home: If you have more than one home, you can exclude 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.

Example One: You own and live in a house in the city.  You also own a beach house, which you use during the summer months.  The house in the city is your main home; the beach house is not.

Example Two: You own a house, but you live in another house that you rent.  The rented house is your main home.

I hope these tax tips can be helpful next time you prepare your income tax – especially for those divorcing couples. – denino1951@gmail.com   

Hermenegildo Benavidez Mislang, beloved husband, father, grandfather and a community leader, passed away on February 23, 2021 in Las Vegas, Nevada. He was 67 years old.

Known as Gil to many, he was the eldest son of the late Feliciano Mislang Sr. and Felicidad Benavidez Mislang. He was survived by his wife Violeta, sons Jan-Michael and Christopher Mislang, three grandchildren, mother Felicidad and six siblings.

Gil was born in his hometown of Mangatarem, province of Pangasinan, Philippines and came to the United States in the late-1950’s as his father was a serviceman in the United States Navy. In 1966, his father retired and  moved the family back to the homeland. Gill obtained his Bachelor of Science in Chemistry from the Far Eastern University in Manila. Gil moved back to the US in 1977, married his college sweetheart Violet in 1978, raised two kids in the City of Downey where they lived for 41 years. Last year, Gil and Violet moved to a home in Las Vegas, Nevada.

Gil was employed by the Dunn-Edwards Paint Corporation where he served in several capacities as Lab Technician, Quality Control Chemist, R&D Chemist, and Director of Research and New Product Development.  In 1991, he attended and completed the Executive Program in Management at UCLA’s John Anderson Graduate School of Management. While working, Gil joined the American Chemical Society of Southern California Section and served as Chair from 2004 to 2005.

In 2009, Gil was the recipient of the Sister Agnes Ann Green Award for Distinguished Service in recognition of his continued exemplary service in wide variety of leadership roles in the Section. Over the course of his career, Gil had opportunities to travel other countries such as Germany, Canada, Mexico, China, and Thailand. He often looked forward to attending the Annual Paint and Coatings Symposium, meeting colleagues in the industry, and excited to visit his favorite places to eat, such as Commander’s Palace, and Cafe Du Monde in New Orleans.  

Gil participated in many Filipino-American non-profit organizations providing support with the goal of enhancing and uplifting Filipino cultures and image in addition to helping those in need. Gil got his first baptism of fire in community service by serving as the fifth president of Assn. of Mangatarem Overseas Residents (AMOR) of Southern California (1999-2000) founded by his compatriot Dan E. Nino. Thereafter, he became president of Pangasinan Brotherhood-USA in 2002-2003. From then on, his community involvement rose to wider level. He served as President of the Philippine Disaster Relief Organization (Pedro), Kalayaan Incorporated, and board member of the Filipino American Service Group, Inc.  Gil also supported the Philippine Scouts Heritage Society in promoting and seeking equity, and recognizing the contributions of the Filipino World War II veterans   

Over the years, Gil’s interests ranged from outdoors activities such as playing golf, basketball, and deep-sea fishing. Although Gil and Violet moved to their new home in Las Vegas, he remained a fanatic fan of the Los Angeles Lakers, and Dodgers and was greatly excited when both teams won the championships in 2020. His contributions to the  upliftment and advocacies of the Filipino-American community in general will forever be remembered.  – denino1951@gmail.com   

Welcome fellow Pangasinanse and kababayans!  My name is Neil Estrada, current President of Pangasinan Brotherhood USA also known as PB-USA.  PB-USA is a non-profit 501C3 organization first formed in 1978 serving our fellow Pangasinanse both here in the United State and back home in Pangasinan, Philippines. 

PB-USA will continue to educate, empower, and enrich our members, family, and friends.   In turn, I invite you all to participate in the committees, meetings, and activities of Pangasinan Brotherhood as this is your organization.  As President, I want to make it clear that each and every one of you matter.  We welcome any and all suggestions and ideas as we continue to build and improve the organization.  Our future as an organization is in your trusted hands.

Pangasinan Brotherhood has been blessed throughout the years because of our dedicated members, board of directors, and officers.  We have been able make charitable donations that have positively impacted countless lives.  Whether it be building homes in Namnama Village in Villasis, and Laoac, Pangasinan, scholarship grants, infomercial forums, relief funds, wellness to Persons With Disabilities (PWDs) to computer donations to help young children get educated, among others — PB-USA will remain a positive and impactful force in the community.  Our continued efforts in participating in outreach programs will only strengthen our organization. 

I believe that collaboration between members and also between organizations is more important than ever moving forward.  Shared information and resources are key in an effort to expand and thrive.  PB-USA looks forward to even more partnerships this year and in the years to come.  As the collaborative efforts come, we will make announcements to keep our members updated and so that they too can participate.

I am a proud Pangansinanse to say the least. I was born in a house in Calasiao where my father, Merlo Estrada, comes from. I also have roots in San Carlos City where mother, Paz Estrada, is from.  You can say that I am a dual citizen of the province of Pangasinan.  Pangasinan has such a rich and vibrant culture and history.  I want ensure that our culture and history is shared with our members, family, and friends for this is where our roots originated from. 

We all have something to contribute.  As president of Pangasinan Brotherhood USA, I would love to spotlight your accomplishments, share stories, enjoy your talent, learn about your hometown, and most importantly get to know you. 

PB-USA is an organization of positivity and where all are welcome.  I hope to meet and connect with you all soon. 

Sincerely,

Neil Estrada

Neil Estrada

PB-USA, President

Dear Fellow PB-USA Board Members & Stakeholders,

            Per your request, I’m e-mailing you the Certificate of Appreciation from Alpha Phi Omega (Philippines) of Greater Los Angeles to Pangasinan Brotherhood-USA as our partner in grateful recognition as co-sponsor of our 501 C-3 public charity and non-profit organization’s Humanitarian Service Project particularly the Gabay Group. This is a special thanks for your participation in mitigating the sufferings of our less-fortunate fellowmen through your donations.

            Please see attachment.

            George, please also include this in our PB-USA website. The original copy of the Certificate of Appreciation is in my file.

            Dan E. Nino

            Board Chairman, PB-USA

Feb. 14, 2021

Dear Valued & Fellow Taxpayers,

With these challenging times, I hope this tax letter and reminder will find you well, safe and sound. Definitely, 2020 is a year that we would rather forget and should be relegated into the dustbin of history.

I empathize to those who have lost their loved ones or friends due to the pandemic.

I will be working at my home office but will entertain  clients behind my house covered patio as a safety precaution.

Please be aware that under the Tax Cut & Jobs Act of 2017, many itemized deductions have been eliminated. However, it was replaced by standard deductions. Our tax software will choose which is more beneficial to the taxpayer for potential refunds or payments.

Here are some of the basic changes for Tax Year 2020:

1. A standard deduction of $12,400 for a taxpayer  filing single.
2. A standard deduction $24,800 for married filing jointly.

Here are tax deductibles that are still in place:

1.  A home mortgage interest is still tax deductible on Schedule A through 2026.
2. Personal property or real estate taxes.
3. A college tuition fee of your children can still be claimed under the American Opportunity Credit.
4. It’s good to be charitable including your donations to your church which is 60% deductible.
5. If you spent a home improvement including a wheelchair ramp for your elderly parents, the amount spent is deductible.
6. You can claim a home mortgage interest deduction on your existing home mortgage limited to $750,000.
7. If you are over 65, a qualified out of pocket medical expenses is surgery to treat a defective vision.

Here are non-tax deductibles:

1. Starting in 2018, meals and entertainment expenses for clients cannot be deductible.
2. The reimbursement payment on moving expenses made by taxpayer’s employer.
3. If you wish to rollover your current 401 (401K) into a traditional IRA or Roth IRA you may make a tax-free rollover within 60 days of the distribution from your retirement account.
4. A personal casualty and theft losses could no longer be claimed under the TCJA except for casualty losses suffered in a federal disaster area. The deductible percentage is 10%.

Basic Taxable & Non-Taxable Tax Laws in California and Federal Returns:

1. The Railroad Retirement Tier 1 is not taxable in California.
2. California unemployment compensation is never taxable on the California return.
3. Federally, Social Security benefits are taxable but not taxable in California.
4. Bartering qualifies as taxable income in California?
5. An educator expenses are tax deductible in federal return but not in California
6. Refunds from Self-employment are not taxable in California.

Here are other basic changes in the TCJA:

1. If you sell your home, the amount that you can exclude from the gain in order to avoid paying capital gains taxes is $250,000.
2. Qualified Business Income allows sole proprietors, shareholders in an S-Corporation, partnership and trust and estates to claim a deduction for up to 20 percent of qualified domestic income from that Sole Proprietorship, S-Corporation or Partnership.
3. Beginning in 2018, the TCJA expanded the definition of “dependent” to treat someone as your dependent for purposes of several tax benefits, such as the Child Tax Credit or the Earned Income Tax Credit. A parent of the taxpayer although living apart could benefit from the credit of $500 for  “Other Dependent Credit.”
4. A bank record receipt is required for each donation that shows the amount, date, and to whom it was paid. Just be ready to obtain a Contemporaneous Written Acknowledgment (CWA).
5. Considering the new CARES laws passed, they contain a large number of benefits and subsidies for individuals and small businesses due to the Coronavirus pandemic like the Paycheck Protection Program (PPP). Certain requirements must be met in order to have this loan forgiven by the Small Business Administration. The loan cannot be used to refinance an existing business loan.
6. The partnership must furnish copies of a Schedule K-1 to the partners by the partnership return due date (or extended due date). If a K-1 is not issued, a $270 penalty for each partner will be charged.
7. A domestic Limited Liability Company (LLC), with at least two members, that does not file Form 8832 (Entity Classification Election), should be classified as a partnership.
8. In regard to calculating the Qualified Business Income of a shareholder of an S-Corporation, the best option is that an S-Corporation issues a K-1 form showing all the required information to calculate the QBI for the shareholder, shown in box 17.
9. State, local property, and sales tax expenses were generally fully deductible on a federal tax return; and that amount was transferred to a California tax return. California will not conform to the federal tax law changes. The new federal rules state that beginning in 2018, the state, local property, and sales tax expenses are limited to: $10,000.

I hope this will help you understand our current tax laws. Contact me should you have questions.

                                                          Dan E. Nino, CRTP & Notary Public

                                                 Principal, Summit Tax & Business Counselors

12540 E. Oak Creek Lane, Cerritos, CA 90703-2042

Tel. Nos. 562-508-8099 (Cell) * 562-921-5116 (Landline) * E-mail: denono1951@gmail.com

Pangasinan Brotherhood-USA, also known as PB-USA, is a 501-C3 public benefit and charitable non-profit organization. It is one of the oldest and leading Filipino-American provincial organizations in Southern California.

            PB-USA, an umbrella organization of all Pangasinan town and city associations was founded in 1978 by the late Ambassador Armando C. Fernandez, then the Philippine consul general of Los Angeles. He is a native and former vice mayor of Dagupan City,  Pangasinan’s first chartered city in the province.

PB-USA  has done its share in community and civic engagement in the U.S. and in the province of Pangasinan. Through the years, it was at the forefront of providing meaningful projects and programs that impact its community in California and its beloved province of Pangasinan. Among them are livelihood fact-finding missions and trade seminars in Los Angeles and Pangasinan,  granting of scholarships grants to college-bound children of marginalized families from various town of Pangasinan, provided funds and relief goods to victims of natural disasters in Pangasinan other regions of the country like rebuilding a church in the diocese of Borongan, Samar devastated by Typhoon Haiyan, cooperative livelihood program in select towns in Pangasinan, endowment of four  Gawad Kalinga housing units in the towns of Villasis and Laoac,  promoting Pangasinan native products through trade shows and exhibits in Los Angeles, the biggest of which was the Trade Expo and Diversity Street Festival attended by Pangasinan manufacturers and producers in the  City of Artesia in October 2014 and providing seminars to self-improvement and  wellness to the community.  

Lately, PB-USA has co-sponsored the Gabay Group in Barangay Sangandaan, Quezon City for the wellness of 21 children with disabilities.

From 1978 to date,  17  presidents has led this organizations

Pangasinan, a first class province in terms of revenue and  the third largest province in the Philippines in terms of land area, has 48 towns and four cities occupying 5,368.82 sq. kms.

Indeed,  Pangasinan Brotherhood–USA strives to be partners in any manner in community and nation-building for our adopted country, the USA and the Philippines  that vigorously work for progress and quality of life of  its people. 

To continue with the video, please click the link below

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