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Pennsylvania Free Printable Brochure: Sale of Your Principal Residence and PA Personal Income Tax Implications (REV-625) for 2024 Pennsylvania Sale of Your Principal Residence and PA Personal Income Tax Implications Brochure

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Sale of Your Principal Residence and PA Personal Income Tax Implications Brochure
Brochure: Sale of Your Principal Residence and PA Personal Income Tax Implications (REV-625)

CONTACT INFORMATION Online Customer Service Center www.revenue.pa.gov SALE OF YOUR PRINCIPAL RESIDENCE AND PA PERSONAL INCOME TAX IMPLICATIONS What is a residence? A residence is a house, lodging or other place of habitation, including a trailer or condominium that: • Has independent or self-contained cooking, sleeping and sanitation facilities; Taxpayer Service & Information Center Personal Taxes: 717-787-8201 Business Taxes: 717-787-1064 e-Business Center: 717-783-6277 • Was used and physically occupied by a taxpayer for residential purposes; and • Was not occupied or used by a taxpayer on a sporadic and transient basis, or only for a definite and promptly accomplished purpose. Automated 24-hour FACT & Information Line 1-888-PATAXES (728-2937) Touch-tone service is required for this toll-free call. Call to order forms or check the status of a personal income tax account, corporation tax account or property tax/rent rebate. What are the requirements to exclude from PA-taxable income the gain from the sale of a principal residence? The seller(s) must meet these four requirements: Automated Forms Ordering Message Service 1-800-362-2050 (1) Date of Sale: The sale of the principal residence must be after Dec. 31, 1997. The date of the sale is the date the buyer accepts the deed and the title passes from the seller to the buyer, usually the date of settlement. Service for Taxpayers with Special Hearing and/or Speaking Needs 1-800-447-3020 Call or visit your local Department of Revenue district office, listed in the government pages of local telephone directories. Generally, homeowners who owned and used their homes as principal residences for at least two of the five years prior to the date of sale will qualify for exclusion of the gain from the sale of a personal residence from PA taxable income. If the seller postpones delivery of the deed, the sale is the date possession and the burdens and benefits of ownership pass from the seller to the buyer. For a condemnation, the date of the sale is the date the taxpayer receives the condemnation proceeds. For destruction or casualty loss, the date of sale is the date the taxpayer receives the casualty insurance proceeds or damages. (2) Use: The law requires that a taxpayer used the residence as the principal residence for a total of at least two years during the five-year period preceding the date of sale. Example: John bought a house in Harrisburg on Jan. 1, 2001. He lived there until July 1, 2002. He changed jobs and moved to Pittsburgh in July 2002, but he maintained his Harrisburg home. He did not www.revenue.pa.gov REV-625 PO (04-15) rent it or use it for any other purposes. He moved back to his home in Harrisburg in 2003 and lived there until he sold it in 2005. John meets the requirement for using his house as his principal residence for at least two years during the five-year period preceding the sale. If John had never moved back to his Harrisburg home, he would not meet the use requirement for this exclusion. Even though he never rented his house or used it for any other purpose, John would have to pay PA income tax on any gain he realized from the sale of his Harrisburg home. (3) Ownership: The law requires that a taxpayer owned the residence as a principal residence for a total of at least two years during the five-year period preceding the date of sale. Example: Mary leased one-half of a house in State College and resided there since 2000. In 2002, she bought the entire property and used it as her principal residence until she sold it in 2005. Mary meets the ownership requirement for this exclusion. However, if Mary had bought the house in 2004, she would not meet the ownership requirement. Important: The taxpayer does not have to meet the use and ownership requirements simultaneously, but the taxpayer must meet both during the five-year period preceding the date of the sale. (4) Prior Sale: To qualify for the exclusion, the taxpayer could not have sold another principal residence within the two years preceding the date of sale of the current residence. Example: Rob and Ann owned and lived in a house in Johnstown. In February 2002, they moved to Erie and bought a new house. In August 2002, they sold their Johnstown home. They owned and used the Erie home as their principal residence until they sold it in June 2005. They meet all the requirements for this exclusion. However, if Rob and Ann sold their Johnstown home in August 2003, they would not meet the prior sale requirement for the Erie house’s exclusion. They owned and used their house for at least two years during the five-year period preceding the sale, but they would have sold their principal residence within two years of the sale of their next principal residence. What if a taxpayer meets the use and ownership requirements, but sells his or her principal residence within two years of selling his or her next principal residence? The taxpayer will not qualify for the exclusion. However, if the principal residence is sold due to an unforeseen change in employment, health or severe financial hardship, a taxpayer could qualify for the exclusion. An unforeseen change is one caused by accident, illness, loss of property, casualty or another unexpected event beyond the control of the taxpayer. Example: If in the previous example Rob and Ann sold their principal residence in Erie because Ann’s employer relocated her to Williamsport, they would qualify for the exclusion from the two-year prior sale provision based on an unexpected change in employment. If a taxpayer owns more than one home, which is the principal residence? The principal residence is the home that the taxpayer physically occupied and personally used most during the five years preceding the sale of the residence. Moving furniture and personal belongings into a residence does not qualify as use. Even if the taxpayer’s family physically occupied the residence, it is not the taxpayer’s principal residence if he or she did not occupy it. Example: Bill and Helen purchased a home in Pittsburgh in January 2001, and Bill began working in Philadelphia in March 2001. He leased an apartment there and commuted to Pittsburgh on weekends, holidays and vacations. In January 2005, they sold their Pittsburgh residence. Helen meets the use and ownership requirement for the exclusion, but Bill does not. He meets the ownership requirement, but does not meet the use requirement. He only used his Pittsburgh home for three months in 2001. His principal residence was his apartment in Philadelphia. If they elect to file separate PA tax returns, Helen qualifies for the exclusion on her half of the gain, while Bill must pay PA personal income tax on his half of the gain. If they file jointly, since one spouse met the four requirements, they both qualify for the exclusion. What if one of the homeowners die? The authorized representative of a decedent may not claim this exclusion on the final PA tax return of an otherwise qualifying decedent, unless the decedent closed the sale before death. The decedent’s estate or trust may not exclude the gain on the sale of the decedent’s principal residence. What if the taxpayer sells the principal residence on an installment basis? If the owner meets all four requirements, an installment sale qualifies for this exclusion. What if a principal residence is a mixed-use property (partly used for business, commercial, industrial, rental, investment or other nonwww.revenue.pa.gov residential purposes) – Could the taxpayer still qualify for the exclusion? The taxpayer may be able to exclude a portion of the gain. Gain is determined separately on the portion of the property used for residential purposes and the portion of the property used for other purposes. The gain that is attributable to the property used for nonresidential purposes does not qualify for the exclusion. What is a mixed-use property? Examples of mixed-use property include the following: • A sole proprietor’s residence above his retail store; How could one spouse qualify and the other not? If a couple files a joint return and at least one spouse qualifies for the exclusion, they will both qualify. However, if they file separate returns, then they each must qualify for the exclusion individually. Example: If one spouse lived in an assisted-living facility for the four years immediately preceding the sale of the residence and the other spouse lived in the residence, the spouse that lived in the assistedliving facility does not qualify and must pay tax on his or her share of the gain. The best way to avoid this situation is to file a joint PA income tax return. • A duplex where the owner rents one unit and lives in the other; and If the requirements for the exclusion aren’t met, how is gain reported? • An office or licensed daycare facility located within a residence. Gain or loss is reported on PA Schedule D. Mixed use also includes property where the land surrounding the residence is more than the taxpayer reasonably needs for a residence. The land surrounding a farmhouse that the taxpayer uses for commercial agriculture, livestock breeding or dairy purposes is not necessary for residential purposes. The department supplies a worksheet that assists in calculating a gain on the sale of a principal residence and the taxable portion. The PA-19 worksheet and instructions are available on the department’s website, www.revenue.pa.gov, or by calling 1-888-PATAXES. What if some time during the period a taxpayer owned a home, a portion of the residence was used as a business in the home? If a taxpayer sells a house and qualifies for a full exclusion of the gain, is he required to report any information on/with the PA-40 tax return? If a taxpayer received or was entitled to a depreciation deduction for having an office in the home, for PA purposes or not, that portion of the home does not qualify for the exclusion. A taxpayer that claimed and received allowable office-at-home depreciation may not exclude the gain on that portion of the principal residence. This applies even if the taxpayer stopped claiming the office-at-home expenses. If a taxpayer is eligible for Tax Forgiveness without reporting any gain from the sale of a principle residence, he is required to include the gain from the sale of the home on Line 8 in Part C of PA Schedule SP, Special Tax Forgiveness, in the determination of eligibility income. Otherwise, taxpayers qualifying for the full exclusion of the gain are not required to report or include any additional information or forms with PA-40 income tax returns. www.revenue.pa.gov
Extracted from PDF file 2023-pennsylvania-form-rev-625.pdf, last modified April 2015

More about the Pennsylvania Form REV-625 Individual Income Tax TY 2023

We last updated the Sale of Your Principal Residence and PA Personal Income Tax Implications Brochure in February 2024, so this is the latest version of Form REV-625, fully updated for tax year 2023. You can download or print current or past-year PDFs of Form REV-625 directly from TaxFormFinder. You can print other Pennsylvania tax forms here.

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Other Pennsylvania Individual Income Tax Forms:

TaxFormFinder has an additional 174 Pennsylvania income tax forms that you may need, plus all federal income tax forms.

Form Code Form Name
Form PA-40 Pennsylvania Income Tax Return
Form 40 Instruction Booklet Income Tax Return Instruction Booklet (PA-40)
Form PA-40 SP PA Schedule SP - Special Tax Forgiveness
Form PA-40 A PA Schedule A - Interest Income
Form PA-40 PA-V PA-40 Payment Voucher

Download all PA tax forms View all 175 Pennsylvania Income Tax Forms

Form Sources:

Pennsylvania usually releases forms for the current tax year between January and April. We last updated Pennsylvania Form REV-625 from the Department of Revenue in February 2024.

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About the Individual Income Tax

The IRS and most states collect a personal income tax, which is paid throughout the year via tax withholding or estimated income tax payments.

Most taxpayers are required to file a yearly income tax return in April to both the Internal Revenue Service and their state's revenue department, which will result in either a tax refund of excess withheld income or a tax payment if the withholding does not cover the taxpayer's entire liability. Every taxpayer's situation is different - please consult a CPA or licensed tax preparer to ensure that you are filing the correct tax forms!

Historical Past-Year Versions of Pennsylvania Form REV-625

We have a total of three past-year versions of Form REV-625 in the TaxFormFinder archives, including for the previous tax year. Download past year versions of this tax form as PDFs here:

2023 Form REV-625

Brochure: Sale of Your Principal Residence and PA Personal Income Tax Implications (REV-625)

2022 Form REV-625

Brochure: Sale of Your Principal Residence and PA Personal Income Tax Implications (REV-625)

2021 Form REV-625

Brochure: Sale of Your Principal Residence and PA Personal Income Tax Implications (REV-625)

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