Capital Gains and Selling Your Home
If you’re planning to sell your home, it’s important to understand how capital gains may impact your taxes. Here’s what you need to know about capital gains and selling your home.
What Are Capital Gains?
Capital gains are the profits you make when you sell an asset, such as a home or an investment property. If you sell your home for more than you paid for it, you have a capital gain.
Capital Gains and Home Sales
When you sell your primary residence, you may be eligible for a capital gains exclusion. This exclusion allows you to exclude up to $250,000 in capital gains if you’re single, or up to $500,000 if you’re married filing jointly.
To qualify for the exclusion, you must meet certain requirements, such as owning and using the home as your primary residence for at least 2 of the past 5 years.
What If You Don’t Qualify for the Exclusion?
If you don’t qualify for the capital gains exclusion, you may still be able to minimize your tax liability by deducting certain expenses, such as the cost of any improvements you made to the home.
Selling your home can have significant tax implications, but understanding how capital gains work can help you make informed decisions. As always, it’s a good idea to consult with a tax professional or financial advisor before making any major financial decisions.