Fineman CPA Group logo

Fineman CPA Group

 

The Village Shoppes

95 Washington Street, Suite 203

Canton, MA 02021

Phone: 781-821-2727

 

Email: bob@finemancpa.com

Website: www.finemanCPA.com

December 2023

Understanding Capital Gains Tax On Home Sales

Home For Sale Real Estate Sign in Front of New House.

Are you thinking of selling your primary residence? Unless the home has decreased in value since you bought it, you’ll want to know about potential capital gains tax on your sale. You don’t want to incur a larger-than-necessary tax bill.


TAX BASICS
Gains on the sale of personal or investment property held for more than one year are taxed at favorable capital gains rates of 0%, 15%, or 20%, plus a 3.8% investment tax for people with higher incomes. Gains on these properties held for one year or less are taxed at higher ordinary income rates. Residential real estate is an exception.


TAX EXCEPTIONS FOR YOUR PRIMARY RESIDENCE
Up to $250,000 ($500,000 for joint filers) of your gain is tax-free if you’ve owned and lived in your home for at least two out of the five years before you sell. Any gain greater than this exclusion is taxed at capital gains rates. Losses from the sale are not deductible. A spouse who sells the family home within two years after the other spouse's death gets the total $500,000 exclusion, provided the two-out-of-five-year use and ownership tests were met before death.


EARLIER SALES
If you must sell your home before two years due to job changes, illness, or unforeseen circumstances, you may still be eligible for part of the gain exclusion. The exclusion percentage that can be taken equals the portion of the two years you used the home as a residence.


NATURAL DISASTER DAMAGE
Was your home damaged or destroyed in one of this year’s federally declared natural disasters? Then your capital gain amount will equal any insurance proceeds you received that exceed your pre-disaster tax basis in the home. The gain exclusion is available for this gain amount.


Home sales are complex and can be emotional. Consult your tax and real estate professionals before selling. Your financial professional can help you budget for your new home.


SUBSCRIBE

Enter your Name and Email address to get
the newsletter delivered to your inbox.

Please include name of person that directed you to my online newsletter so I can thank them personally.


CONTACT US

Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.

The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.