Editor's note: Every Sunday through the end of tax season, The Sun will run an edited transcript of Baltimoresun.com's weekly tax advice column featuring experts from the Sparks accounting firm SC&H; Group who will answer reader questions. Submit questions at www.baltimoresun.com/taxtalk
I sold my house for a big profit. I plan to buy in the near future but I am currently renting. I am spending the profit from the sale. What are the issues related to the profit, length of time to buy and does the new house have to cost more than the old or simply as much as the gain from the sale?
- Mark, Elkridge
The sale of your personal residence is generally not a taxable event. A gain of up to $250,000 for single taxpayers ($500,000 for married couples) may be excluded as long as the taxpayers owned and used the home as their principal residence for at least two of the past five years. The exclusion applies to one sale every two years.
You are not required to purchase another home within a particular time frame nor does the price of your new home matter. As a single taxpayer, as long as you meet the requirements above, you do not have to report the sale on your tax return nor will you be taxed on the gain from the sale.
I donated a car in 2007. I would like to claim the amount the car sells for but the agency where I donated it has not sold it yet. Can I claim the donation on my 2008 taxes or do I have to wait until the car is sold and claim it on my 2007 taxes?
- Willie, Randallstown
There are a few different situations related to the donation of an automobile to a charity. If the value of the vehicle is over $500, you need to obtain Form 1098-C (or some type of written acknowledgment), which must identify the following:
The donor and the donor's identification number
The vehicle identification number
The gross proceeds from the sale
In most cases, the sale price of the automobile is considered the fair market value, which you use as your charitable deduction. However, if the organization is going to keep the car for use by the organization, they need to inform you of their intent to use it.
You should contact the organization to see what it plans to do with the car and how soon it will happen. You should then make sure that the organization gives you the appropriate documentation if they have not done this already.
For the first three months of 2007, I lived in Baltimore City. Then I bought a house in Baltimore County where I remain. Do I have to apportion my taxes between Baltimore City and Baltimore County for 2007 or do I use only the Baltimore County rate for the full tax year?
- Don, Towson
Your local tax rate is determined by the location of your principal residence on the last day of the tax year. Therefore, your local income tax amount for the entire year will be calculated using the Baltimore County tax rate of 2.83 percent.