Tax traps await homeowners, landlords
Tax time provides an opportunity to cash in many of the rewards of dabbling in last year’s red-hot real estate market — but there are numerous tax traps if you sold a home, refinanced your mortgage or bought an investment property in 2005.
Although the rules are too twisted to explain fully, here’s a brief primer of four common real estate transactions that could leave you vulnerable in an audit:
1 If you sold your home: Most sellers can cash in one of the biggest perks in the tax code. Couples can sell their home for a $500,000 profit without paying a cent of income tax. Single taxpayers can pocket $250,000.