- 2 -
|
it in June 2005. They meet all the requirements for Even if the taxpayer’s family physically occupied residential purposes) – Could the taxpayer still How could one spouse qualify and the other not?
this exclusion. the residence, it is not the taxpayer’s principal qualify for the exclusion?
If a couple files a joint return and at least one
However, if Rob and Ann sold their Johnstown home residence if he or she did not occupy it. The taxpayer may be able to exclude a portion of spouse qualifies for the exclusion, they will both
in August 2003, they would not meet the prior sale Example: Bill and Helen purchased a home in the gain. Gain is determined separately on the qualify. However, if they file separate returns,
requirement for the Erie house’s exclusion. They Pittsburgh in January 2001, and Bill began working portion of the property used for residential then they each must qualify for the exclusion
owned and used their house for at least two years in Philadelphia in March 2001. He leased an purposes and the portion of the property used for individually.
during the five-year period preceding the sale, but apartment there and commuted to Pittsburgh on other purposes. The gain that is attributable to the Example: If one spouse lived in an assisted-living
they would have sold their principal residence weekends, holidays and vacations. In January 2005, property used for nonresidential purposes does not facility for the four years immediately preceding the
within two years of the sale of their next principal they sold their Pittsburgh residence. Helen meets qualify for the exclusion. sale of the residence and the other spouse lived in
residence. the use and ownership requirement for the the residence, the spouse that lived in the assisted-
exclusion, but Bill does not. He meets the ownership What is a mixed-use property? living facility does not qualify and must pay tax on
What if a taxpayer meets the use and requirement, but does not meet the use require- Examples of mixed-use property include the following: his or her share of the gain. The best way to avoid
ownership requirements, but sells his or her ment. He only used his Pittsburgh home for three this situation is to file a joint PA income tax return.
principal residence within two years of selling months in 2001. His principal residence was his • A sole proprietor’s residence above his retail store;
his or her next principal residence? apartment in Philadelphia. If they elect to file • A duplex where the owner rents one unit and If the requirements for the exclusion aren’t
The taxpayer will not qualify for the exclusion. separate PA tax returns, Helen qualifies for the lives in the other; and met, how is gain reported?
However, if the principal residence is sold due to an exclusion on her half of the gain, while Bill must pay • An office or licensed daycare facility located Gain or loss is reported on PA Schedule D.
unforeseen change in employment, health or severe PA personal income tax on his half of the gain. within a residence.
The department supplies a worksheet that assists
financial hardship, a taxpayer could qualify for If they file jointly, since one spouse met the four Mixed use also includes property where the land
in calculating a gain on the sale of a principal
the exclusion. An unforeseen change is one caused requirements, they both qualify for the exclusion. surrounding the residence is more than the
residence and the taxable portion. The PA-19
by accident, illness, loss of property, casualty or taxpayer reasonably needs for a residence. The land worksheet and instructions are available on the
another unexpected event beyond the control What if one of the homeowners die? surrounding a farmhouse that the taxpayer uses for department’s website, www.revenue.pa.gov, or by
of the taxpayer. The authorized representative of a decedent may commercial agriculture, livestock breeding or dairy calling 1-888-PATAXES.
Example: If in the previous example Rob and Ann not claim this exclusion on the final PA tax return purposes is not necessary for residential purposes.
sold their principal residence in Erie because Ann’s of an otherwise qualifying decedent, unless If a taxpayer sells a house and qualifies for
employer relocated her to Williamsport, they would the decedent closed the sale before death. The What if some time during the period a taxpayer a full exclusion of the gain, is he required
qualify for the exclusion from the two-year prior decedent’s estate or trust may not exclude the gain owned a home, a portion of the residence was to report any information on/with the PA-40
sale provision based on an unexpected change in on the sale of the decedent’s principal residence. used as a business in the home? tax return?
employment. If a taxpayer received or was entitled to a
If a taxpayer is eligible for Tax Forgiveness without
What if the taxpayer sells the principal
depreciation deduction for having an office in the reporting any gain from the sale of a principle
If a taxpayer owns more than one home, residence on an installment basis?
home, for PA purposes or not, that portion of the residence, he is required to include the gain from
which is the principal residence?
If the owner meets all four requirements, home does not qualify for the exclusion. A taxpayer the sale of the home on Line 8 in Part C of PA
The principal residence is the home that the an installment sale qualifies for this exclusion. that claimed and received allowable office-at-home Schedule SP, Special Tax Forgiveness, in the
taxpayer physically occupied and personally used depreciation may not exclude the gain on that determination of eligibility income. Otherwise,
most during the five years preceding the sale What if a principal residence is a mixed-use portion of the principal residence. This applies even taxpayers qualifying for the full exclusion of the gain
of the residence. Moving furniture and personal property (partly used for business, commercial, if the taxpayer stopped claiming the office-at-home are not required to report or include any additional
belongings into a residence does not qualify as use. industrial, rental, investment or other non- expenses. information or forms with PA-40 income tax returns.
www.revenue.pa.gov www.revenue.pa.gov
|