1. If It's Your Primary Residence → You May Qualify for the Capital Gains Exclusion
You can exclude up to:
$250,000 in capital gains (Single)
$500,000 in capital gains (Married Filing Jointly)
✅ To qualify for the exclusion, you must:
Have owned and lived in the home for at least 2 out of the last 5 years before selling.
Not have used this exclusion on another home sale within the past 2 years.
💡 Example:
You bought a home for $300,000 and sell it for $600,000.
Your profit = $300,000.
If you're single, you can exclude $250,000, so you only pay tax on $50,000.
If you're married filing jointly, you owe $0 in capital gains tax.
2. If It’s an Investment Property (No Exclusion)
If the house was not your primary residence, you must pay capital gains tax on the full profit.
Short-term gain (if held <1 year) → Taxed as ordinary income.
Long-term gain (if held >1 year) → Taxed at 0%, 15%, or 20% depending on your income.
💡 Example:
You bought a rental property for $300,000 and sell it for $500,000.
Your profit = $200,000.
If your total income is under $518,900 (single), you’ll pay 15% tax → $30,000 in capital gains tax.
3. Ways to Reduce or Defer Capital Gains Tax
✔ Use a 1031 Exchange – Defer taxes by reinvesting in another investment property.
✔ Deduct Selling Expenses – Realtor fees, closing costs, and repairs can reduce taxable gains.
✔ Offset Gains with Losses – If you sold another asset at a loss, you can lower your taxable gain.
✔ Convert Rental into Primary Residence – If you live in the home for 2+ years, you may qualify for the exclusion.
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