Unmarried couple needn't worry about taxes on home-sale profit
There's no reason for an unmarried couple to worry about paying federal taxes on the sale of a jointly owned home, as long as neither of their resale profit exceeds $250,000 and they have lived in the home for at least two years.
Q. My boyfriend and I are selling the home we have owned for six years. Prices in our area have dropped a lot, but we will still make about a $125,000 profit each from the sale because we bought it when prices started going up. How will our profit be taxed? Will we be punished by the Internal Revenue Service because we are not married and file our tax returns separately?
A. There's no reason to worry. Internal Revenue Code 121 allows married couples who file their taxes together to keep up to $500,000 in their home-sale profit tax-free, provided that they have lived in the house for at least two of the previous five years. Single tax-filers (like you and your boyfriend) who meet the two-out-of-five-years test can each keep $250,000 away from the clutches of the IRS.
The $125,000 profit that each of you expect to make falls well below either of those limits, so you probably won't owe any federal taxes at all.
Talk to an accountant for more details. Also get a free copy of IRS Publication 523, "Selling Your Home," by calling the agency's toll-free hotline, (800) 829-3676, or by downloading it on your computer from www.irs.gov.
Q. The wood front door to my house is driving me crazy because it sticks (and is almost impossible to open or close) when it's cold, but then shrinks when it's hot and lets out all the cool air from my air-conditioning unit. What gives?
A. The problems with your door might be caused because the home is aging and settling into its foundation. But more than likely, the weather in your community is the culprit.
When it's cold, the damp air tends to make wood expand - and thus makes a door more difficult to open or close because it starts rubbing against its door frame. When it's hot, the wood shrinks and the doors become easier to operate: That's good for you, but not so good for your utility bills, because much of the cold air that's generated from the AC unit literally goes out the door.
Many such problems can be solved by sanding, painting and then applying a weather-resistant finish to the door. Make sure that you cover all six sides: The front, back, top and bottom, as well as the latch side and hinge side.
Your local utility company may have additional information. Many utilities offer free "energy audits" - or even free weatherstripping and minor repairs - that can save you hundreds of dollars in gas or electric bills each year.
Q. We recently retired, and took a driving tour across the U.S. to celebrate. In New Mexico, we went through a town called Truth or Consequences, the same name as the old radio and TV show. Are they related?
A. Yes. Located near the southern edge of New Mexico, the town was called Hot Springs until 1950, when the host of the popular "Truth or Consequences" game show offered to broadcast some its programs from the first town that would rename their community after the show. Local politicians quickly jumped at the chance: Though their dreams of turning the area into another Hollywood never materialized, its luxurious spas and natural amenities now lure thousands of visitors every year.
Although the little town on the Rio Grande has a funny name, there are some that are equally humorous. For example, you would likely have lots of fun on a Friday night at Yeehaw Junction in Central Florida, but probably wouldn't want to drive several hours north to finish the weekend in Boring, Md.
Maryland is also home of communities named Accident, Unicorn and Snow Hill (the last of which has virtually no hills and often very little snow).
How would you like to be a resident of Ding Dong, Texas, or Nimrod, Minn.? Are there lots of nosy neighbors in Booger Mountain, N.C., a bunch of spendthrifts in Tightwad, Mo., or some particularly angry folks in Squabbletown, Calif.?
The state of Virginia used to run a massive ad campaign that called it "the state for lovers," though it probably wasn't based on its little town called Assawoman (which happens to be just down the road from Superior Bottom, W.Va.).
When I toured the South several years ago, I didn't stop to eat in Greasy Corner, Ark., but had a nice cup of java in Hot Coffee, Miss. And I'll bet the food is really good in Lickskillet, Ohio; Two Egg, Fla.; and Sandwich, N.H.
After making such terrible puns, I'm sure I'll go to Hell For Certain - the name of a rugged patch of land in the unincorporated part of Leslie County, Ky.
• For a copy of the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960
© 2009, Cowles Syndicate Inc.