If you’re thinking of selling your home, you may be wondering if you’ll have to pay taxes on any gains from the sale. The good news is that, in most cases, you won’t! Here’s what you need to know about tax-free home sale gains.
Under certain circumstances, you can exclude up to $250,000 of gain from the sale of your home from your taxes, or up to $500,000 for married couples filing a joint return. To qualify for this exclusion, you must meet all three of the following requirements:
1) You must have owned and used your home as your main home for at least two years out of the five years prior to its sale.
2) You can exclude gain only once every two years.
3) You must not have excluded gain from the sale of another home during the two-year period before the sale of your home.
If you meet all three of these requirements, you can exclude up to $250,000 of gain from your taxes ($500,000 if married filing jointly).
If you don’t meet the requirements above, you may still be able to exclude a portion of the gain using what’s called a “partial exclusion.” To claim a partial exclusion, you must own and occupy your home for at least one year out of the two years prior to its sale and meet one of the following two requirements:
1) You must sell your home due to a change in place of employment, health reasons, or unforeseen circumstances beyond your control.
2) You must sell your main home that was condemned or destroyed by disaster.
If you meet one of these requirements and sell your main home for less than its fair market value, you may be able to exclude all or part of the resulting loss from your taxes as well.
As you can see, there are a number of different situations in which you may be able to avoid paying taxes on gains from the sale of your home. However, it’s important to note that these rules can be complex, so it’s always best to speak with your tax professional before making any decisions. With that said, we hope this overview has given you some helpful information to get started!