How much of a gain can I take on the sale of my house before I have to pay a capital gains tax?
If you have lived in the house for 2 of the last 5 years, there is a special exclusion. You can exclude $250,000 of gain if you are single and $500,000 if you are married. You calculate the gain by first taking the amount you sold the house for, and the subtracting the price you paid, the cost of major improvements, and the costs of selling the house, such as real estate commissions.
Remember, this special rule only applies to your personal residence. Vacation homes don’t qualify. And if you were running a home business and took depreciation deductions, you’ll have to pay tax on those amounts. Be sure to keep receipts for what you paid for the house and major improvements. You’ll need these numbers so that you can exclude those amounts when calculating the exemption or any taxable gain.
