Do capital gains on the sale of my home get taxed?

I often get asked about how capital gains from the sale of someone’s primary residence are handled.  I recently read an article by Tom Herman in the Denver Post Business Section on Sunday April 22, 2012 that addressed this question.  It was summed up as this:

“…Here are the general rules:

Let’s assume that the home you’re asking about is your primary residence, and that you purchased it several years ago.  If you sell it this year, you typically would be eligible for highly favorable tax treatment enacted during the Clinton administration.

Taxpayers typically can exclude as much as $500,000 of the gain on the sale of their primary residence if they’re married and filing a joint federal income-tax return.  For singles, the maximum exclusion is $250,000.

This is a generous provision.  After all, these exclusion amounts refer to your profit, not the sale price.

To qualify for the full exclusion, taxpayers typically must have owned the home-and used it as their primary residence-for at least two of the five years prior to the sale.

If you can’t meet these tests, you still might be eligible to exclude some, or all, of your gain, depending on other factors – including how long you lived in that home and why you sold it…

There is even more fine print.  See Publication 523 for details or consult a tax pro.”

Hope this helps as you navigate your real estate decisions moving forward!  And always remember…

Life’s Better on Easy Street!

By Mike Olson, Broker Associate with Easy Street Properties