Most people won't owe taxes after selling home at a profit

Most sellers can keep up to $500,000 of their profit away from the Internal Revenue Service, even if they then decide to rent a new home instead of purchasing one.

Q. My wife and I have lived in the same house for the past 21 years, but now we are planning to sell it and then rent a home in a retirement community. Can we still keep up to $500,000 in our resale profit tax-free, or is this tax break only available to people who buy another house instead of renting one?A. Don't worry. All of your resale profit likely will be tax-free.Internal Revenue Code 121 allows most married couples who file their taxes jointly to keep up to $500,000 of their home resale profit away from the clutches of the IRS. Single tax-filers can keep up to $250,000.You don't need to buy another house to qualify for this big tax break - renting a new place would be OK - as long as you meet the IRS' "residency rule." It requires that sellers who want to keep their profit tax-free must have used their old home as their personal residence for at least 24 months in the previous five years before the sale.Your letter states that you and your spouse have lived in your current home for more than two decades, so you obviously meet this important guideline. Discuss your personal situation with an accountant or other tax professional for more details.Q. You recently wrote that all home buyers should include a "financing contingency" in their purchase agreement so they can get their sales deposit back if their loan application is not approved. My husband and I recently visited a lender and were preapproved for a $275,000 loan, and now we have found a house that we would like to buy for only $254,000. Is a financing contingency still required?A. A financing contingency is never required in a purchase offer, but it is always advisable to include one - even for buyers who get preapproved for a mortgage before they begin hunting for a new home.Most real estate deals today include such a contingency, which allows buyers to cancel a sale and get their deposit back if their mortgage application is not approved. Even though your bank has preapproved a mortgage for you to buy a house, it has the legal right to cancel its decision and deny the loan for any number of reasons - including the loss of a job, a sudden illness that leaves you unable to work or even the mere filing of a groundless lawsuit that could tie up your personal assets in court.With home values still dropping in many parts of the nation, it's also important for you to realize that the bank can yank your preapproval if you sign a contract to buy a house but the appraiser then determines that the property is worth less than you agreed to pay.Considering all these potential pitfalls, savvy buyers always include a financing contingency in their purchase offers to protect their good-faith deposits.Q. Can you recommend a good source of information about buying a manufactured home?A. Perhaps the best source is the nonprofit Manufactured Housing Institute, which offers a variety of publications to the public at little or no cost. One of its best booklets is "How to Buy a Manufactured Home," which the trade association copublishes with the Federal Trade Commission. The institute's mailing address is 2101 Wilson Blvd., Suite 610, Arlington, VA 22201-3062. You can get more information, including answers to commonly asked questions about manufactured homes, by visiting the group's Web site (manufacturedhousing.org).Q. I own a small apartment building, and one of the units is vacant. A prospective tenant with an outstanding credit record applied for the apartment, but he is blind and uses a guide dog. I do not allow pets in the building, and I am afraid that if I rent to him, other tenants will demand that they get to have pets, too. Do I have the legal right to reject the man's application because he needs a dog to get around but I have a strict "no-pets" policy?A. Probably not. Your letter states that the prospective renter has excellent credit, so rejecting his application simply because he needs a guide dog could open you up to a lawsuit under the provisions of the Americans with Disabilities Act or federal fair-housing laws.Also remember that guide dogs are not "pets," but highly trained service animals that often act better than many human tenants. Renting to the blind man won't obligate you to let others in your apartment building to have animals, and may simultaneously allow you to avoid an expensive lawsuit.bull; For the booklet "Free and Clear: Getting the Mortgage Monkey Off Your Back," send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 2960, Culver City, CA 90231-2960.#169; 2010, Cowles Syndicate Inc.