{"id":369465,"date":"2016-04-04T10:47:27","date_gmt":"2016-04-04T15:47:27","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/realestate\/selling-your-home\/the-home-sale-tax-exemption.html"},"modified":"2024-07-24T20:38:32","modified_gmt":"2024-07-25T01:38:32","slug":"the-home-sale-tax-exemption","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/realestate\/selling-your-home\/the-home-sale-tax-exemption.html","title":{"rendered":"The Home Sale Tax Exemption"},"content":{"rendered":"\n
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The Home Sale Tax Exemption<\/h1>\n
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\n By Olivia Wathne, J.D.<\/a> | Legally reviewed by Aisha Success, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Capital gains taxes are taxes on any profit you make when selling a capital asset, such as a house. Fortunately, the law allows you to lower your tax liability for selling your home.<\/p>\r\n

Before the 1997 Taxpayer Relief Act<\/a>, people faced significant capital gains taxes when they sold property. These taxes were applied unless they upgraded to a home with a more expensive purchase price. <\/span>
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Learn about who can get a home sale tax exemption. Calculate how much you might save on your tax return if you qualify.<\/p>\r\n

What Is the $250,000\/$500,000 Tax Exemption?<\/h2>\r\n

This tax exemption allows sellers to avoid any house sale<\/a> taxes up to a limit. Single sellers can exclude up to $250,000 of capital gains from taxation. Married couples can exclude up to $500,000.<\/span><\/p>\r\n

Any profit above that limit will be subject to taxes. Tax rates on home sales are usually up to 15%.<\/p>\r\n

Here’s an example. Say you bought a house for $250,000 and later sold it for $550,00. You made a profit of $300,000. If you are unmarried, you can exclude $250,000 of that profit from your taxes. You will only pay taxes at a rate of around 15% on the remaining $50,000 (about $7,500). If you are married, you can exclude $500,000, so the entire profit is tax-free.<\/p>\r\n

Which Properties Are Eligible for The Exemption?<\/h3>\r\n

This tax break only applies to the sale of your main home. It does not apply to a second home or investment property. <\/p>\r\n

How To Calculate the Profit on the Sale of a Home<\/h2>\r\n

On a simple level, profit is the difference between what you spend and what you receive. Yet, real estate usually involves complex costs and gains over many years. Figuring out how much you profit in a home sale can be complicated. <\/p>\r\n

First, look at the original purchase<\/a> price of your primary residence. The following extra fees are not tax deductions, but they do count toward the total cost basis of your principal residence:<\/p>\r\n