What is the Primary Residence Capital Gains Tax Exclusion?

What is the Primary Residence Capital Gains Tax Exclusion?

Thinking about selling your home and curious if you will owe any taxes on the profits? Here is what you need to know...

The IRS allows individuals to exclude $250,000 of capital gains from the sale of a primary residence (and $500,000 for married couples filing joint). This is an awesome exemption that many people will benefit from in their lifetime. But what are the criteria for use?

-You must have lived in the primary residence for 2 of the last 5 years.
-You can only take the exclusion once every 2 years.
-You do NOT have to roll the proceeds into another house.
-Remember, this exclusion ONLY applies to primary homes (not rentals).
-If you have not met the 2/5 years living requirements, the exclusion will be pro-rata.

Bottom line, unless you have significant equity built up in your home, you more than likely will avoid capital gains on the sale of your primary home. If you do surpass the threshold, you will only be taxed on the difference above it.

Remember to consult a financial professional before making any decisions. #primaryresidence #homebuying #homesale

-Your friends at Red Oak Financial Group