If you’re putting your home on the market, you may be able to manage taxes on some of your capital gains. Read on to see what the IRS regulations say.
If you show a capital gain on the sale of your home, you may be able to exclude all or a portion of the gain from your taxes if you have owned and used it as your primary residence for at least two out of the past five years.
Assuming you meet the criterion stated above, you may exclude up to $250,000 from your taxes if you’re a single filer (or up to $500,000 if you’re filing jointly). This¬ exclusion may be used no more than once every two years. (Please note that the Net Investment Income Tax will not apply to the excluded gain.)
Keep in mind that this tip is for informational purposes only. Be sure to consult your tax or accounting professional for more information about the possible tax treatments when selling a home.
Please be aware that if you claimed the first-time homebuyer credit when purchasing your home, special rules may apply to the sale. If you’d like to read more about tax rules when selling a home, you can check out Form 523 on IRS.gov.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov[7]
[7] IRS.gov, February 6, 2020
