Reader Question: In a previous column, you discussed the exemption of tax on the profits for the sale of a personal residence ($250,000 for single filers; $500,000 for couples). My questions are, “Do you include the costs of upgrades/renovations in addition to what you paid for your home? And if there is a taxable profit, can the tax be postponed if you are purchasing a home of equal or greater value? Finally, is there still a one-time exemption on home sales for people of a certain age? D.D.
Answer: According to eau claire realty, any capital improvements are added to your acquisition costs on your home. Capital improvements include things like adding a garage, bathroom, kitchen renovation. Not included would be things like painting, putting on a new roof or general repairs. As to your second question, a taxable profit on the sale of your home cannot be postponed because you buy one that is of equal or greater value. That rule was replaced under the Clinton Administration with the rule discussed above. There is no one-time exemption on the sale of a home based on age.
In response to last week’s column, ‘Avoid Becoming a Victim in the Modern World’, a number of readers emailed me to share their own experiences. Here are a few of their stories and the lessons they learned.
· R.H.’s story involves a night out at a dimly lighted restaurant in a tourist location that is also a favorite eatery for locals. When he received his bill it was double what he expected and it turned out to be the bill for the ‘locals’ eating at a nearby table. A ‘shallow’ apology was made by the waitress and when he returned home he found out she had doubled the tip! His credit card company straightened out the mess. While the vast majority of wait staff are honest, the lesson of this tale is that you must diligently review your restaurant bill particularly if it’s a large number of people in your party and there’s liquor involved! Mistakes happen, even by honest wait staff.
· R.J. was shopping at a large member retailer so she pulled her member card from her wallet and returned her wallet to her purse. Her purse was a typical shoulder purse and while shopping someone ‘bumped’ into her. After leaving the store she realized her wallet was missing and it soon became apparent that the ‘bump’ was a decoy for theft of her wallet. Within two hours about $4,000 in merchandise had been illegally charged on her card. There was clear video evidence of both the bumping incident as well as the thief charging merchandise at various stores. In this case the police never followed through or reported back to this victim. She said her lesson was to keep her purse zipped! I would add that you always need to remain alert to your environment. There have been cases of shoppers accosted in retail store parking lots as well as shoppers being followed home.
· F.M. takes a moment each day to review his checking account and credit card account transactions online (a really good idea!). Last month he noticed a $569 debit card charge on his checking account. He immediately contacted his bank and the merchant about the unauthorized payment. The bank required that he sign an affidavit that he did not make the purchase. Even with his speedy reaction, it took seventeen days for the money to be returned to his account. You see, one disadvantage of using a debit card versus a credit card is that with a debit card your money is gone until the bank resolves the matter in your favor whereas with a credit card, you can dispute the charge before you pay your bill.
· J.V. wonders how he can be so lucky? It seems he is often the winner of sweepstakes from major retailers. All he has to do to claim his prize is provide his Social Security number and other personal data so that the retailer can issue a 1099 tax form for reporting taxes. He asks me how he should respond? By now all of you know you should never give your Social Security number and other personal information to someone you don’t know. Your best bet is to assume you are not the winner of a sweepstakes and move on.