If an individual filing single sold the above home for $620,000 then if they qualified for the deduction only $30,000 of the gains would be taxed at a rate based on where their income fell on the above table.
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For example, a $280,000 home with a $60,000 addition might have the cost basis considered at $340,000, which would allow an individual to sell it tax free for up to $590,000, while a married couple could sell it for as much as $840,000 without incurring any taxes. The cost basis of the home is typically the price the home was purchased for, however major home additions can increase the cost basis of the house. Long-Term Capital Gains Tax RateĮxample Longterm Capital Gain Calculation On Selling Primary Residence Here are the capital gain rates for 2019 based on income level & filing status. IRS Publication 523 has more eligibility information. The exclusion can only be used once in a two-year period & does not apply to properties obtained through a 1031 exchange. To qualify you must have owned the home for at least 2 of the last 5 years leading up to the date of sale & used it for your primary residence. According to IRS topic 701, homowners selling their primary residence can often exclude up to $250,000 in capital gains on the sale, or $500,000 if they file jointly with their spouse. One factor this calculator does not take into account is capital gains. Capital Gains Considerations When Selling a Home
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