Claiming capital gains exclusion
How having two homes affects tax filing
Q: We live in Massachusetts and recently bought a home in Florida. We are retired, and my wife and I are considering making Florida our primary residence to save on state income taxes. But we want to keep our Massachusetts home for now to spend summers in New England. Will this plan eliminate our ability to claim the capital gains exclusion on our Massachusetts home when we sell it and move to Florida full-time?
A: That will depend on when you sell your Massachusetts home and establish permanent residency in Florida. People who are married filing jointly can exclude up to $500,000 in home-sale profits from their taxes, or up to $250,000 for single filers, if they have lived in the home as their principal residence for two of the past five years.
“The two years do not need to be consecutive,” says Jeffrey Schneider, an enrolled agent in Stuart, Fla. You may be able to work on the timing of the sale and the permanent move to Florida to qualify for the exclusion, he says.
Changing your residence for income taxes has its own set of rules. To establish Florida as your domicile for tax purposes, you’ll need to show that you spend more than half the year (183 days) in Florida and plan to make the state your permanent residence. Build a file of evidence in case you’re audited by the state that is losing your tax payments.
Keep a log showing the days you spend in each state. It also helps to register to vote and change your driver’s license and car registration to the new state. Ask the state’s department of taxation or a local certified public accountant about other steps to take to change your domicile. In Florida, for example, you can also file a Declaration of Domicile with your local county court.
Q: I read that Medicare beneficiaries can’t use drug manufacturer co-pay cards or coupons. But what about pharmacy discounts?
A: Manufacturer co-pay cards and coupons are different from the discount cards and coupons that patients can download from websites such as GoodRx, NeedyMeds or RxAssist. Those are pharmacy discounts that you use when you pay cash instead of using insurance. You would access them if a drug’s cash price is lower than the outof-pocket costs you would owe with insurance.
Medicare beneficiaries are barred by federal law from using a drug manufacturer’s co-pay card or coupon because of anti-kickback rules. But if you pay the cash price for a drug, you can use the pharmacy discount coupon or card.
You also can submit your cash expense to your Medicare plan, and it should count toward reducing your plan’s outof-pocket spending requirements, says Leslie Fried, of the Center for Benefits Access at the National Council on Aging. Be sure to confirm your pharmacy is in-network and your drug is covered under your plan.