Real Estate Blog

When you sell a home that has been your principal residence for two out of the previous five years, you are entitled to a significant income tax deduction.  The Federal Tax Code allows married home sellers filing jointly to keep up to $500,000 in tax-free profits from the sale of a home.  Taxpayers who file singly (even if they are married) are allowed a $250,000 capital gains exclusion.
 In 2003, the tax rate for capital gains above the limit dropped from 10% and 20% (depending on your tax bracket) to between 5% and 15%.  Any home sale profit in excess of the allowable amounts for married and single taxpayers is now taxed at the new, lower rate – another benefit for homeowners. 
 Homeowners who buy a home, live in it for two years and then sell the property are allowed to take this capital gains tax exemption once every two years.  This tax break is a big plus for those who are planning to buy a more expensive residence or acquire a vacation or retirement home.  The tax-free dollars you gain can be used any way you want.       
 Consult your tax advisor for your particular circumstance.