Will I Pay Capital Gains Taxes on the Sale of My Home
Will you pay tax on the sale of your home? Likely not, unless you have gains that are more than $250,000 or more than $500,000 for married couples.
Until 1997, once you reached the age of 55, you had the one-time option of excluding up to $125,000 of gain on the sale of your home providing it was your primary residence.
Now, anyone, regardless of age, can exclude up to $250,000 of gain or $500,000 for a married couple filing jointly on the sale of a home.
That means most people will pay no tax unless they have lived there for less than 2 out of the last 5 years.
Who Qualifies for Tax-free Gains When They Sell Their Home?
To qualify for the capital gain tax exclusion on your home sale, you must meet the following IRS requirements.
Owned the home for at least 2 years. (the ownership test)
Lived in the home as your main home for at least 2 years. This is the use test. If you plan on renting your home for part of the year, study this use test carefully. The amount of gain you can exclude from taxes may be proportional to how much you use it vs. rent it.
During the 2-year period ending on the date of sale, you did not exclude gain from the sale of another home.
You can use this capital gain exclusion to avoid tax on a home sale over and over.
The Law Office of Jeanne M. Reardon assists New York property owners with strategies to protect and pass on their homes and real estate investments. To speak with an experienced New York real estate attorney, call us at (516) 314-8433 or e-mail us.