Do You Have to Pay Capital Gains on Selling Your Home?

When selling your home, you may be eligible for a substantial capital gains tax exclusion ranging up to $500,000 in excluded gains. Financial analyst Matt Mellusi, MSFP, of Cary Stamp & Co. in Tequesta, FL introduces the basics of the $250,000/$500,000 Home Sale Tax Exclusion.

TRANSCRIPT:
I’m Matt with Cary Stamp and Company and today I want to share with you about a tax break you may be eligible for if you’re selling your home.

If any kind of asset is held for longer than a year, upon the sale of that asset, a capital gains tax is paid on the profit made. Long-term capital gains have three tax brackets that vary based off of your income and filing status. Depending on those factors, your long-term capital gains tax may be 0%, 15% or 20%. This long-term capital gains tax applies to the sale of your home, but what some people don’t know is that depending on your filing status and the home sale price, you may be eligible for an exclusion.

The IRS typically allows you to exclude up to $250,000 worth of long-term capital gains on your home if you’re single and $500,000 worth of long-term capital gains on your home if you’re married and filing jointly. Some key factors to qualify for this exclusion are: 1) the home must be considered your primary residence. 2) you must have lived in the house for two out of the previous five years, and 3) you must have owned the home for two out of the previous five years.

There are a few other outlying factors, so make sure to consult a financial professional to see if this is something you could qualify for.

Let’s go over an example. If you purchased a home ten years ago for $300,000 and sold it today for $900,000, you’d make $600,000. If you’re married and filing jointly, $500,000 of that gain might not be subject to capital gains tax, but $100,000 could be.

In an inflated real estate market, it’s crucial to be aware of anything that could be to your advantage if you’re considering selling your home. Make sure to consult a financial professional to see if you’re eligible for this exclusion. I’m Matt Mellusi with Cary Stamp and Company and thanks for watching.

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