What Is the Capital Gains Tax on Home Sales?


As of 2015, single homeowners can sell their property and gain up to $250,000 in pure profit without paying a capital gains tax, while married homeowners are exempt up to $500,000, according to the Internal Revenue Service. Under the Taxpayer Relief Act of 1997, homeowners can only use the exemption once every two years. Additionally, they must show that the home was their primary residence for two out of the five years preceding the sale in order to qualify for the exemption.

To determine if the profit from a home sale is exempt, it is important to deduct all related expenses from the sales price, as noted by Nolo. These include things like expenses for capital improvements to the property, closing costs on the sale, and other fees that affect the final profit margin. In many cases even if the gross profit on a home sale is more than the exemption allows, when factoring in these other figures, the actual net profit is within the exemption limits.