Source
r/tax•
error__fatal

Considering hiring a tax professional for the first time

Unsolved

Up until now I've been comfortable filling out my taxes online, but I suspect this years tax bill could be high and I want to make sure it's submitted in the best way possible. I'm just trying to get a better understanding on how to achieve this.

My wife and I file jointly and we have one dependent. Our regular income is just W-2, but we moved from NC (has income tax) to FL (no income tax) about 6 weeks ago.

The reason I expect a big tax bill is because we sold our home between one and two years after we purchased it for a net gain. Based on my understanding this means we'll owe long-term capital gains tax on the profit.

I skimmed through IRS Publication 523 which lists some vague sounding reasons for a partial exclusion of gain. For example:

The home became significantly less suitable as a main home for you and your family for a specific reason

Not to get too personal, but I feel like this could apply to us. We purchased the home when it was just us two, and at the time we were under the impression that my wife could not get pregnant. To our surprise she became pregnant shortly after, and we had to move her mother in to help us with the baby so we could continue working. The home we purchased was too small for 4 people, so we sold it to move to a larger home closer to family.

We also made what I would call improvements to the property, but I'm not sure if the IRS would agree with that. We installed a $4500 privacy fence and placed a large $4000 shed in the back yard.

I have no idea how to even attempt to claim something like this. I feel like the combination of the capital gains and the move from NC to FL means we'd be best off going to a pro.

Am I correct in thinking this? If so, who do I look for? Tax preparer? CPA? Any advice is welcomed.

Posted Sep 29, 2021, 7:39 PM UTC

19
I__Know__Stuff•

The improvements definitely can be added to your basis to reduce your gain.

3
missmoxiesue•

I don't know that a married couple having a single baby qualifies for unforeseen. Hopefully you have some medical documentation to support your position. You didn't have to have Momma move in, you chose to have Momma move in. Yes, find a professional who is willing to sign off on it.

2
I__Know__Stuff•

If you got a new job (or new job location) in Florida that should qualify you for a partial exclusion. See publication 523 starting on page 6.

2
I__Know__Stuff•

Selling a house isn't so complicated that you need a professional, if you can understand and follow the instructions in publication 523 and form 8949, but using a professional can be worth it for peace of mind.

2
x596201060405EA•

If your wife got pregnant that is 100% a qualifying event my fella.

1
I__Know__Stuff•

I disagree. The IRS specifically calls out "Gave birth to two or more children from the same pregnancy" as a qualifying event. I don't think a single birth qualifies.

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x596201060405EA•

The IRS also specifically says

"Other Facts and Circumstances
Even if your situation doesn’t match any of the standard requirements described above, you still may qualify for an exception. You may qualify if you can demonstrate the primary reason for sale, based on facts and circumstances, is work related, health related, or unforeseeable. Important factors are:

The situation causing the sale arose during the time you owned and used your property as your residence.

You sold your home not long after the situation arose.

You couldn’t have reasonably anticipated the situation when you bought the home.

You began to experience significant financial difficulty maintaining the home.

The home became significantly less suitable as a main home for you and your family for a specific reason."

Let's look at the facts:

" We purchased the home when it was just us two, and at the time we were under the impression that my wife could not get pregnant."

"we had to move her mother in to help us with the baby so we could continue working."

"The home we purchased was too small for 4 people."

A slam dunk if ever saw one. If my client was in that situation, I'd slap my signature on it twice and if the IRS tried to disallow it, I'd go to the state capital for free to do appeals.

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I__Know__Stuff•

I agree. I still disagree with your original assertion, though: "If your wife got pregnant that is 100% a qualifying event."

Also, assuming his work location changed to Florida, that would be a far easier reason to use.

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x596201060405EA•

Ah, fine. Although, depending the situation, I'd still argue that an unexpected pregnancy qualifies, unless we talking someone with like a 10k sq ft. house. But sure, I suppose to birth of a single child isn't enough end of itself.

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