What are the taxes involved on selling a home?

ANSWER

Expert Michael Lim's Answer:

 There are capital gains tax that can possibly be involved on the sale of a home.  However, if your home has been your primary residence for two years of the last five year period ending on the date of the sale or exchanged, you may be able to exclude $250,000 of capital gains (the increase in value over and above your purchase price, plus the cost of any improvements).

This amount is doubled to $500,000, in the case of a husband and wife who make a joint return for the taxable year.

This exclusion of capital gain applies to only 1 sale or exchange every two years, and any sales made before May 7, 1997 are not taken into account.  The exclusion of gain also does not apply to homes which are not used as primary residences, such as vacation or rental property.

IRC Code: TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART III > § 121.

Michael Lim, CPA

California

16 yrs experience

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