Is it true that you can sell your home and not pay capital gains tax?

Real Estate, Taxes
Answers
Sort By:
Most Helpful
September 2016
97% of people found this answer helpful

The majority of people who sell their primary residence, in which they have lived for at least 2 of the last 5 years, do not pay a capital gains tax on the sale. In addition to the $250,000 exclusion from capital gains per person (or possibly $500,000 for a couple), you can also subtract your full cost basis in the property from the sales price. Your cost basis is calculated by starting with the original purchase price you paid, and then adding the expenses you paid to make the purchase (e.g. attorney fees, the cost of title insurance, and any settlement fees). To this figure, you can add the cost of any additions and improvements that had a useful life of over 1 year, made while you owned the property. And then finally, you add your selling costs, such as the fees paid to a real estate broker and your attorney, as well as any transfer taxes that you may have to pay.

By the time you finish totaling all the costs of buying and selling and improving the property, your capital gain on the sale will likely be lower than the first back-of-the-envelope calculation that you made.  And then subtracting the $250,000 exclusion from this gain figure often brings it below zero.

January 2006
September 2016
September 2016
September 2016