Keller Williams Realty
What to Know About Capital Gains Tax
It’s unlikely that you’ll have to pay capital gains tax on the profit from your home sale thanks to the Tax Payer Relief Act of 1997. The law allows a single homeowner to earn up to $250,000 in tax-free profit on the sale of the home. Married couples filing jointly qualify for a $500,000 capital gains exclusion. Capital gains tax is a federal tax placed on the profits from the sale of real estate or some other investment. The amount of profit from your home sale will determine whether you will owe capital gains tax. Homeowners may use the capital gains tax exclusion once every two years. A married couple can’t claim the exclusion if either spouse has used the exclusion within the past two years.
There are a few conditions you must meet in order to qualify for the capital gains tax exclusion: the property you’re selling must be your principle residence and you must have owned it and lived in it for at least two of the five years before the sale. The two-year period you’re required to have lived in the home needn’t be consecutive. For married couples, both spouses must have lived in the house for at least two years of the five years before the sale.
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