Milan Accounting

The home sale exclusion can wipe out a big chunk of capital gains—but only if you meet the rules. A single filer can exclude up to $250,000 in gains on a primary residence, or $500,000 for a married couple filing jointly.

To qualify, you generally need to have lived in the home for at least 2 of the last 5 years. There are exceptions, though. If a homeowner moves into a care facility due to incapacity, that requirement can drop to just 1 year.

The actual tax bill depends on more than just the gain itself. A simple estimate might assume a flat 15% rate, but in reality, the final number can vary widely depending on total income and filing status.

Marital status also changes the outcome significantly. A married couple may be able to exclude the entire gain that would otherwise be taxable for a single filer.

Large cash gifts come with their own rules. If the amount exceeds the annual exclusion, it has to be reported and counts against the lifetime exemption.

State taxes can add another layer. Some states tax capital gains, while others impose inheritance taxes on assets passed down.

And one detail many people overlook—selling a home can change how assets are treated for programs like Medicaid. Converting a home into cash can affect eligibility and even trigger penalties if the money is transferred within certain timeframes.

Because when it comes to real estate and taxes, the details don’t just matter—they change everything.

💰 Adding a child to your deed transfers ownership during your lifetime. The child receives your original cost basis on the transferred portion, not the stepped-up basis they would get if they inherited at death.

The tax math depends on how the transfer is structured. If you deed the entire home to your child (as shown in the image), they inherit 100% of your original basis. On a home bought for $80,000 and worth $350,000 at death, that is a $270,000 taxable gain and up to $40,500 in federal capital gains tax at the 15% rate.

The more common move is adding a child as a joint tenant, which typically transfers 50% ownership. In that case, only the child's half carries the original basis. The parent's half still receives a stepped-up basis at death, reducing the taxable gain to roughly $135,000 and the tax to roughly $20,250.

Adding a child to the deed also exposes the home to the child's creditors, divorce proceedings, and lawsuits. The transfer may trigger Medicaid's lookback period depending on state law.

One exception worth knowing: if the child lived in the home as a primary residence for at least 2 of the last 5 years before selling, the Section 121 exclusion can shelter up to $250,000 of gain ($500,000 if married filing jointly).

A TOD deed avoids the basis problem entirely. No ownership transfers during your lifetime. The beneficiary gets a full stepped-up basis at death. TOD deeds for real estate depend on state law, and not every state allows them.

Familia: the calm after the storm.

After 12-18 hour days serving clients for tax season. I finally got a day to relax. Enjoy the water and the sun.

Tomorrow, I finally get my knee repaired. Torn meniscus and MCL.

Keep me in your prayers.
Be back to work in about a week.

Can business debt become personal? In some cases, yes. If you’re a sole proprietor or a general partner in a partnership, you’re personally liable for business debts. Owners of corporations and limited liability companies are generally protected from personal liability, unless they personally guarantee a loan, commit fraud or fail to keep business and personal finances separate. Payroll taxes are different. The IRS can assess the Trust Fund Recovery Penalty to hold owners, officers or other responsible individuals personally liable for unpaid withheld payroll taxes, regardless of the business structure. This applies even if the business declares bankruptcy. Call us at (305) 772-5700 with questions.

If you own foreign assets and fail to properly address them in your estate plan, unexpected tax outcomes can result. For example, if you’re a U.S. citizen, your worldwide assets are potentially subject to federal gift and estate taxes, regardless of where you live or where the assets are located. So, if you own assets in other countries and the assets are subject to estate, inheritance or other death taxes in those countries, there’s a risk of double taxation. Call us at (305) 772-5700 to learn more about how to properly account for foreign assets in your estate plan.

Holding real estate within your operating company may lead to unfavorable tax outcomes and increased risk. For example, office or warehouse space owned by a C corporation is generally subject to double taxation when it’s sold. Or, if a customer is injured on company property, other business assets could be at risk. Separating real estate into its own entity, such as a limited liability company or partnership, can help reduce your exposure and provide greater flexibility for long-term planning. Call us at (305) 772-5700 to review your business structure and determine the best fit for your situation.