Taking stock of your taxes now -- midway through the year -- can pay off next April.
Here are some tips if you recently sold a house, moved into a vacation home or expect to prepay estimated tax this year.A tax break for home sellers will expire soon. If you sell before Aug. 6, you may qualify for special relief even if you haven't satisfied the usual use and occupancy tests.
As a rule, couples can exclude up to $500,000 of gain on their home (and singles, $250,000) if they have owned and used the home as a principal residence for at least two of the five years before the sale. You don't have to be living in the home if you meet the two-year test. Normally, this exclusion can be used every two years, but there are exceptions.
A partial exemption is allowed for homes sold before Aug. 6, as long as you owned the home on Aug. 5, 1997. A similar break is allowed if you move because of a new job or poor health, even if the two-year test isn't met.
If, for example, you lived in the house for one out of the five years before the sale and satisfy the other requirements, you and your spouse can claim up to $250,000 (one-half the $500,000 capital gain exclusion.)
Vacation homes that become primary residences may also qualify for the $500,000 or $250,000 capital-gains exclusion. Retirees can sell a primary residence, move into the vacation home, then sell that after two years or more. Both sales would qualify for the exclusion.
The same goes for rental property you move into for two years or more. But any gain attributed to depreciation claimed after May 6, 1997, cannot be excluded.
Upper-income taxpayers who prepay estimated taxes must contribute more this year to avoid penalty. If adjusted gross income (AGI) is more than $150,000 ($75,000 if you're married filing separately), you must pay in at least 105 percent of what you paid on your 1998 federal tax return.