Tax Implication of Selling Your Home
Most of my clients profit from selling their homes, and they often have questions about capital gains tax.
When you sell your primary residence, you are not taxed on your profits if (1) you have lived in the home for two of the last five years and (2) your gain does not exceed $250, 000 as a single taxpayer or $500,000 as a married couple filing jointly. Gains above the limt are taxed at the current rate of 15% for higher income taxpayers and 5% for lower income taxpayers. Whatever your age, you are free to invest all of your gain, or any part of it, or none of it at all in another home without further tax consequences. Homeowners can use this tax-free provision every two years. As set forth in the American Job Creation Act of 2004, properties converted from a 1031 exchange property into a primary residence must be held and used a as primary residence for at least five years to qualify for the tax exemption.
Consult your tax accountant for more detailed information regarding your particular circumstance.
This article was written by Carol Van Wagner of Ellison Realty.