Capital Gains on the sale of your home

Many people are familiar with IRS rules concerning capital gains on real estate but if not here is a brief refresher:

When you sell your primary residence, you are not taxed on any profits if;

• You have have actually lived in the home for two out of the last five years.


• Your gain on the sale does not exceed $250,000 as a single taxpayer or $500,000 as a married couple filing jointly.

Gains above these limits are taxed at the current rate of 15% for higher income tax payers and 5% for lower income tax payers.
In 2008 the rate will continue for higher income taxpayers; while the 5% lower income rate will drop to 0% for the 2008 tax year only. Then on January 1, 2009, the long term capital gains tax will once again be 15% and 5% through 2010.
Homeowners can use this tax free provision every two years. As set forth in the American Job Creation Act of 2004, properties converted from a 1031 exchange property into a primary residence must be held and used as a primary residence for at least five years to qualify for the tax exemption.

To determine what, if any "gain" you have you need to consult a tax specialist or go to the IRS website for publications on the subject.