Land sale is taxed; however, there may be a reduction or an exclusion from tax when selling a home, depending on how much profit was obtained from the sale and how long the owner lived in the home before selling it. Most sellers will be excluded from tax on the sale of their home.Continue Reading
If the house was occupied by the owner for two of the five years prior to the sale, and is the primary house for the owner, then taxes are excluded up to a certain limit. For a single owner, taxes are excluded on profits of up to $250,000. For those who are married and filing jointly, the tax exclusion applies to the first $500,000 of profit. After the exclusion levels are met, the amount of additional profit is reported as capital gains tax, using a Schedule D.
Qualifying for the tax break does not require that the owner live in the home for two full consecutive years. The two years may be broken up or occur at the beginning of the five-year period, but the owner must have owned the home during two of the years while in domicile. The exclusion can only be taken on one house sale within a five-year period.Learn more about Taxes