I need to ask a question not already answered

[jawckey]

Hello,

I know that when one sells one's home after living for 2 years in the last 5 years prior to sale, one could deduct a gain to the maximum of 500K. If gain is more than 500K, the excess is taxable in the year of sale.  Given this, consider and clarify.

Home sale price is 2million.

Cost of home is 1Millon.

So gain in 1Million.

Then 500K is tax free.

But 500K gets whacked with Tax.

Suppose if one can take HELLOC and take out loan out of HELLOC or

Do a cash-out refi just prior to sale ..

And thus pay off the 'taken out cash' with sale proceeds to net it against the taxable portion of the gain .. thus reduce it or even eliminate and avoid taxes. I read somewhere that the cash-out is not considered income and not taxable. By the same token, paying it off appears to reduce the taxable gain as well.

Is that legal to do so?

regards

[VolvoGirl]

Loans don't affect the gain on the sale. Just sales price - cost+improvements.   What you do with the proceeds don't matter either.  

[jawckey]

My question is ... how can IRS determine ...

- 1 million being the gain vs

- 500k (gain) + 500k (loan that is taken out of the lender at the time of sale)

Are you saying that the 500K loan should be proven to IRS as some additions to the property to qualify as value of the home and not as loan? If so, how do they expect that from the home seller?

regards

[VolvoGirl]

No I didn't say that.  Loans don't figure into the sale or cost at all.  It is simple the Sales Price minus your original cost plus any improvements to the property.   The original mortgage or loans or refi's don't count.   

[po4musik]

I can't figure out the total income Turbo Tax has come up with. I clicked on the explanation and it listed all of the incomes (W-2, Schedule C, Interest, Dividends, etc)  and then had a negative income number that I can't account for,  bringing my total income down considerably. Where does that negative income number come from? I reported no business losses.

[Mike9241]

look at each line on the 1040 and schedule 1.  then tell us what line has the negative amount.

[VolvoGirl]

Look at your actual tax return 1040.  Don't go by the review or summary screens, those can be misleading and include a lot of other stuff.  What line # on the 1040 is negative?  What line is the total income on?  Line 9 is Total Income  and line 11 is the Adjusted Gross Income.

[po4musik]

I was looking at the Federal Review.

Can I get to where the forms are viewable and still be able to go back and make edits?

[VolvoGirl]

Yes if you haven't filed yet.  Before filing you can preview the 1040 or print the whole return
https://ttlc.intuit.com/community/accessing/help/how-do-i-preview-my-turbotax-online-return-before-f...

As long as you have not Efiled or mailed the return, you can go back in and make changes. Please see the below steps:

In TurboTax Online, sign in to your account.
Select Tax Home in the left menu.
Scroll down to Your tax returns & documents.
Select 2020, and then select Add a State (you're not actually adding a state, this just gets you back into your return so you can make changes).

[po4musik]

Thank you! I'll try this tomorrow and hopefully all will be made clear to me.

[bt32456]

Tax form almost completed but need to add bonus to income. How do I go back

[po4musik]

On Schedule 1 Line 8 Other income there is a -$10,200 labelled UCE. 

What is this? I didn't enter this anywhere.

Is it something to do with unemployment?

[xmasbaby0]

That is the amount of your unemployment that is excluded from being taxed by the IRS.

[Mytruelovehenry]

I was suppose to get my tax return direct deposit on my green dot card and it has the wrong account number I would like to put the right account number so I can get my return direct deposit on my green dot card please

[xmasbaby0]

You cannot  change banking information while your return is in pending, nor can you change it after the return is accepted.

If you e-filed:

Banking information for direct deposit is wrong

If you entered incorrect banking information for your refund, you can change it if your return is rejected.  If it is accepted, however, it is too late to change it.  The bank will reject the refund and send it back to the IRS.  Then the IRS will issue a paper check and mail it to the address you put on your tax return.  Expect a delay of at least a couple of weeks to receive your refund.

Here is what the IRS says about entering incorrect banking information

https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-an...