Home | Newsletter | Advertise
loading...

First-Timer Primer: Taxes and Profit from Selling a Home

  • June 30th

by UrbanTurf Staff

✉️ Want to forward this article? Click here.

First-Timer Primer: Taxes and Profit from Selling a Home: Figure 1

In this First-Timer Primer, we look at an individual’s tax liability associated with the sale of their home.

Here’s the overall picture: For most people, capital gains from selling a home aren’t taxed. The exception is one of the biggest in the tax code — for a single person, up to $250,000 in profit is exempt from obligations to Uncle Sam. If married and filing jointly, that threshold goes up to a comfortable $500,000 exempt from taxation.

There are a few requirements related to getting the tax break:

1. The home has to be your primary residence. The IRS cares how much time you spend there, where you work, and the addresses you use on your tax returns, driver’s license, voter registration and other affiliations.

2. You have to have owned and used your home for at least two of the five years prior to selling it. The years of “ownership” and “use” don’t have to be concurrent or consecutive, and you don't have to be living in the home at the time of the sale. 

If you’ve lived in the home for fewer than two of the previous five years, you’re not completely ineligible for the break, but it will be smaller. A married couple who has only lived in a home for one of the past five years has their tax-exempt profit threshold reduced to $250,000 from $500,000. There are special considerations for people inheriting homes, on active duty in a government position or receiving a home as part of a divorce settlement.

3. You can’t have taken the capital gains exemption on another home within the past two years. The exemption can only be used once every two years.

UrbanTurf encourages readers in complicated tax situations to check with an accountant before claiming the exemption.

Similar Posts:

See other articles related to: capital gains tax, first-timer primer

This article originally published at https://dc.urbanturf.com/articles/blog/first-timer_primer_taxes_and_profit_from_selling_a_home/9852.

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Start browsing below!

First-Timer Primers

Intro guides for first-time home buyers

Red Flags Revealed During a Home Inspection Top 5 Tax Breaks For Homeowners Tax Relief for DC Homeowners
Condo Fee Tutorial What is a Rent Back? 10 Ways To Tell If a Home Renovation is Well Done
Obtaining a Basic Business License For Your Rental What is an Adjustable Rate Mortgage? The Splitting the Rent Formula
How Much Cash Do You Need to Buy a House? Is This Condo Building Financially Healthy? Interest Rates and Mortgage Points
The Scoop on Mortgage Insurance

Unique Spaces

Awesome and unusual real estate from across the DC Metro

The Most Intriguing Loft in DC The R Street Firehouse DC’s One-Room House
Dupont Circle’s Old Frat House To Become Alley Home Best Transition From a Garage To a Home The Roundhouse
Tilden Gardens Restaurant-Turned-Home Hits Market Next Week Logan Circle’s Most Intriguing Garage Frank Lloyd Wright Goes Green in Kensington
Sears Bungalow Gets a Modern Makeover Old Town General Store Becomes Three-Level Home Making the Most of a Skinny House
A Studio 27 Renovation on Capitol Hill Once a Carriage House, Now a Home The Bank that Became a Home
From Pie to Hooch to Heroin to Home The Live-Aboards of Gangplank Marina A Treehouse with Rock Creek Park As A Backyard
Modern Tranquility in Sperryville Saddle Up For Stable Living Throwing a Curve at 550 Square Feet
A Modern Hilltop Retreat Tilden Street Restaurant Becomes Spacious Home Focus on Design: A Vastu Unit at 22 West
The DC Area’s First Net Zero Home A Yankee Goes Green DC’s First Carbon Neutral Home
Eco-Friendly Alley House Off H Street The Gym, The Stables and The Firehouse