Meet Bill and Mary. A married couple, they sold their house last year and made a profit. Capital gains are subject to a federal tax. However, the profits Bill and Mary earned on the sale of their home are not taxed because of the capital gains tax exemption for profits earned on the sale of a principal residence.
Simply put, the capital gains tax is the tax you pay on the profit from selling your home. This seems basic enough but did you know:
* With the home-sale exemption you can exclude up to $500,000 as a married couple of any profits from your capital gains taxes?
* You can add capital improvements (money spent on improving the value of your home) to the cost basis of your home. This in turn, lowers the total profit you pay taxes on?
* In order to take the home-sale exemption from your capital gains taxes the property you’re selling must be your principal residence?
* There is no limit to the number of times you take the home-sale exemption from your capital gains taxes?
These are only a few things to know about the capital gains tax and selling your home. Be sure to get all the details about how capital gains affects you here and sign up for more alerts on changing home ownership tax issues.