We just sold our house and got a great price for it. How do I figure out whether I need to pay taxes on the profit?
It depends on how long you’ve lived in the house and how much profit you made. If you lived in the house for at least two out of the past five years, you can exclude up to $500,000 in home-sale profits from your taxes if married filing jointly, or $250,000 if single.
If you haven’t lived in your home that long, you may still be able to exclude part of the profit if you moved because of a new job (it must be at least 50 miles farther from your old home than your old job was), experienced a change in health or had another unforeseen event, such as a divorce or multiple births (for a full list, see IRS Publication 523, Selling Your Home). In that case, you could exclude a percentage of the profits, based on the portion of the two years that you did live in the house. For example, if you lived in the house for one year and then had to move to another state because of a new job, you could exclude as much as $250,000 in gains—half of the $500,000 exclusion—if you’re married filing jointly. Anything over the limit should be reported on Schedule D as capital gains.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you spent enough money on eligible home improvements, you may not owe taxes on the home-sale profits even if you sold the house for more than $500,000 over the purchase price. To calculate the size of your profit, take the sales price of the house (minus certain selling expenses, such as the real estate agent’s commission and any points paid by the seller) and subtract the adjusted tax basis. The adjusted tax basis is the original cost of the home plus certain settlement fees or closing costs you paid. You can also add the cost of major home improvements to the basis, such as a new roof, a remodeled kitchen, or a new heating or air-conditioning system. (Basic repairs don’t count.)See IRS Publication 523 for more details about which expenses count.
-
3M Leads Dow Stocks After Massive Earnings Beat3M stock is headed toward its best day ever after the industrial conglomerate's impressive earnings report. Here's what you need to know.
-
Social Security Login Changes Taking Effect Soonmy Social Security accounts created before 2021, are transitioning to the Login.gov platform.
-
It’s Not Too Late to Boost Retirement Savings for 2018retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
-
How to Correct a Mistake on Your RMDs from IRAsretirement If you didn't take out the correct required minimum distribution because your brokerage firm made a mistake, the IRS may show some leniency.
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
-
Making the Most of a Health Savings Account Once You Turn Age 65
Making Your Money Last You’ll face a stiff penalty and taxes if you tap your health savings account for non-medical expenses before the age of 65. After that, the rules change.
-
Reporting Charitable IRA Distributions on Tax Returns Can Be Confusing
IRAs Taxpayers need to be careful when reporting charitable gifts from their IRA on their tax returns, or they may end up overpaying Uncle Sam.
-
When You Can Expect to Receive Your Tax Refund
taxes The quickest way to receive your tax refund is to file electronically and have the money directly deposited into your bank account.
-
How a Move Can Change Your 529 Plan Tax Deduction
529 Plans The tax deduction you get for contributing to your state’s 529 plan can disappear if you move to another state.
-
Tap an IRA Tax-Free With an HSA Rollover
IRAs You can convert tax-deferred money in a traditional IRA into tax-free cash by rolling it over to a health savings account and using it to pay for medical bills.
