If you operate a home daycare business and you decide to sell your residence, it is possible that part of the selling price could be subject to income taxes, even if the selling price is less than the cost of your residence. However, in this situation, the amount of gain you will probably have to report will probably be very small compared to the deductions you have taken on your tax return.
If you will have a large gain on the sale of your residence and the sale occurs after 2008, part or all of the gain will be taxable.
Generally, you can exclude up to $250,000 of gain on the sale
of your principal residence. In many cases, if you file a joint
return, the exclusion goes up to $500,000.
For sales occuring after 2008, more of the gain is taxable regardless of the $250,000/500,0 00 exclusion. Essentially, the taxable portion is based upon a ration of the post-2008 business use compared to the total years the property was owned.
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