Quick answer: When you sell a home, profit above your cost basis may be subject to capital gains tax — but the IRS primary-residence exclusion can shield up to $250,000 of gain (single) or $500,000 (married filing jointly) if you meet ownership and use tests. Rules and eligibility vary, so always consult a qualified tax professional before selling.
Key takeaways
- Gain above your basis may be taxable.
- The primary-residence exclusion can shield much of it.
- Up to $250k single / $500k married may be excluded.
- Ownership and use tests apply.
- Consult a tax professional for your situation.
How the exclusion works
If the home was your primary residence for at least two of the last five years (ownership and use tests), you may exclude up to $250,000 of gain if single or $500,000 if married filing jointly. Gain above the exclusion may be taxable.
What affects your taxable gain
- Your cost basis (purchase price plus improvements)
- Selling costs, which can reduce gain
- How long you owned and lived in the home
- Whether it was a rental or second home
Get professional advice
This is general education, not tax or legal advice — consult a qualified tax professional or attorney for your situation. Have questions? Book a free consultation and I’ll help you plan your next step.
Frequently Asked Questions
Do I pay capital gains tax when selling my home?
Possibly, on gain above your cost basis. The primary-residence exclusion can shield up to $250,000 (single) or $500,000 (married filing jointly) if you qualify.
How does the home sale exclusion work?
If the home was your primary residence for at least two of the last five years, you may exclude up to $250k/$500k of gain. Rules apply.
What is my cost basis?
Generally your purchase price plus qualifying improvements. It’s used to calculate your gain, so keep good records.
Does the exclusion apply to rentals?
The primary-residence exclusion has specific rules and may not fully apply to rental or investment properties. Consult a tax professional.
Should I consult a tax professional?
Yes. Capital gains rules are detailed and situation-specific. This is general education, not tax advice.
Written by Surbhi Gupta, REALTOR® · CA DRE# 02314083 · eXp Realty of California, Inc. Serving Fremont, Union City, Newark, Hayward & Milpitas. This article is for general education, not financial advice — confirm current figures with a licensed professional.
