Question 1

Do I pay capital gains tax when I sell my home?

Accepted Answer

Often you do not. If the home was your primary residence and you lived there at least two of the last five years, the Section 121 exclusion lets you exclude up to 250,000 dollars of gain if single, or 500,000 dollars if married filing jointly. You only owe capital gains tax on the gain above that exclusion. Gain is your sale price minus selling costs minus your original purchase price and the cost of improvements.

Question 2

What is the Section 121 exclusion?

Accepted Answer

Section 121 of the tax code lets homeowners exclude up to 250,000 dollars of capital gain if single, or 500,000 dollars if married filing jointly, when they sell a primary residence they lived in for at least two of the last five years. It is one of the biggest tax breaks available to homeowners.

Capital gains tax calculator.

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