What real estate/tax issues should my grandmother be aware of?

Question

My grandmother is on a limited income and is thinking of selling her home which is paid off but in bad condition.

She would be selling it at a loss and is worried that the monies she receives from the sale will affect her income.

What tax issues should she be aware of ?

Answer 1

The sale of a personal residence for most individuals is 100% tax free. Losses on these sales are NEVER deductible and gains are only taxable if they exceed $250,000 ($500,000 if married filing jointly). Therefore, none of the proceeds would even show up on her tax return. I'm not sure of the social security rules though. If she is receiving social security, look at the specific rules for maximum income related to social security. I beleive there is no maximum if she is over a certain age, but I'm not sure of that age.

Answer 2

OK, people have so far addressed income tax adequately.

Now, let's look at other elder issues not directly tax-related. In some states, if she must go into long term care or seeks other social support, she must spend down all assets (except a home) before the assistance is available. COnsider that before selling.

Not knowing your state, her health or age, I'd suggest that you contact an attorney who specializes in elder issues.

Answer 3

If she sells at a loss, she won't owe income tax on the proceeds of the sale. If she is receiving any type of public assistance she should check with the people who administer it to be sure that wouldn't be affected.

Answer 4

If she is selling it at a loss and has documentation to prove it she may be able to reduce any tax she might otherwise owe. She will have no income from the sale of a property that is sold at a loss.

Answer 5

Talk to a financial consultant. If she wants to stay in the house, perhaps a reverse mortgage is the solution.