Income Tax Benefits for Home Owners When Selling

According to U.S. income tax law, home owners have a possible capital gains exclusion from income tax on the sale of their “main home” – and can protect the gain on if they have lived at the “main home” for 2 out of the past 5 years.

Income tax on sale of your home

 When a taxpayer has owned and used the property as their main home for at least two years out of a five-year period right before the sale, they may be able to exclude up to $250,000 of capital gain (up to $500,000 if married filing a joint tax return).

Each person’s unique set of circumstances and facts applied to the tax rules will generally determine whether he/she is entitled to claim the capital gain exclusion on the sale of the “main home”.

IRS Publication 523, Selling Your Home – is an excellent resource and provides the rules, examples and worksheets for clarity. 

Your “main home” for income tax purposes could be your house, houseboat, mobile home, cooperative apartment or condominium.
 
This capital gains exclusion applies only to the sale of your “main home”  – Publication 523 explains rules that apply to a “main home”, including:

  • determining a “main home” when a seller has more than one home
  • details on excluding the gain
  • possible reduced maximum gain exclusion
  • business and rental use of the home
  • taxable depreciation during rental period for the home

Be careful with this.  If you are home or property seller, you should contact an income tax professional to determine whether you are eligible to protect your gain on sale of your “main home” and property. 

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This is for information only and is not the providing of legal or tax services.  Source of information is IRS Publication 523, Selling Your Home

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About Harrison K. Long

Businessman, Professional Realtor agent, GRI, Broker associate, Coldwell Banker Residential Brokerage - Orange County, California - CA DRE 01410855 - Helping property owners, estate trustees, executors and administrators, fiduciaries, bankers, investor group managers, with listing and sale of properties - helping people with their best decisions about homes and real estate - Member at the Orange County Association of REALTORs (serving on its board of directors for 2012); California Association of Realtors (serving on its board of directors for 2011-2102); National Association of Realtors - Also an attorney member of the California State Bar Association #69137 - Contact by telephone or text at 949-701-2515
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