If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home provides rules and worksheets.
How to avoid capital gains tax on a home sale
You can only deduct capital gains on your primary residence. You must have lived in your home for at least 2 years out of the last 5 years before you sell it to qualify for an exemption. The years you've lived in the home don't have to be consecutive. You've owned your home for at least 2 years.
Under current laws, if you sell your principal home and make a profit, you can exclude $250,000 of that profit from your taxable income. ... So, depending on how much of a profit you make on the sale, you and your husband could potentially have no capital gains tax bill at all.
If you sell your primary residence at a profit, you may be able to exclude that profit from your taxable income. ... You can use this 2-out-of-5 year rule to exclude your profits each time you sell or exchange your main home. Generally, you can claim the exclusion only once every two years. Some exceptions do apply.
What Is the Over-55 Home Sale Exemption? The over-55 home sale exemption was a tax law that provided homeowners over the age of 55 with a one-time capital gains exclusion. Individuals who met the requirements could exclude up to $125,000 of capital gains on the sale of their personal residences.
When you sell a house, you pay capital gains tax on your profits. There's no exemption for senior citizens -- they pay tax on the sale just like everyone else.
If you receive an informational income-reporting document such as Form 1099-S, Proceeds From Real Estate Transactions, you must report the sale of the home even if the gain from the sale is excludable. Additionally, you must report the sale of the home if you can't exclude all of your capital gain from income.
You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. This exemption is only allowable once every two years.
The bottom line is that if you inherit property and later sell it, you pay capital gains tax based only on the value of the property as of the date of death. Example: Jean inherits a house from her father George. He paid $100,000 for it over 20 years ago.
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