Capital gains on home sale

Forum|Forum|3 years ago
March 27, 2023
2 replies
0 views

We sold our home in Washington State and moved to Utah, for personal reasons. The home sold for $749,000 and I have learned we will have to pay CG tax on the portion over $500k. Are there any ways to work around this? Any credits or ways to avoid it? It's a new topic for us. Thank you.

Not A Product Question

Best answer by DawnC

You can only do the home sale exclusion every two years, so if you have not sold a home in several years, you have not used the home sale exclusion and would qualify to use it this time. And yes, you can exclude up to $500K of GAINS every 2 two years. As long as your cost basis of the home was more than 250K, you should be able to exclude all of the gains on the sale.

Go through the home sale section in TurboTax and you should get a message that there is NO capital gains tax on the sale after entering the details of the sale and confirming you meet the requirements (TurboTax will ask you how long you lived there and if you have used the exclusion in the last two years).

Search for home sale in TurboTax to be taken to the correct spot to enter a sale of a primary home. You should answer Yes on the following screen.

DawnC

Employee

You pay capital gains tax only on the gain portion of the home. The gain is the excess of sales price over the cost basis of the home. If you bought the house for 350,000 and sold it for 750,000 - you would have a gain of 400K. But if you meet the requirements, you would be able to exclude all of the gains if Married filing Jointly.

That income is free and clear as long as:

You owned the home
It was your main home for two years or more within the five years leading up to the sale
You waited at least two years between selling your primary home and excluding your first $250,000 or $500,000 from taxes. In other words, you may buy and sell as many primary homes as you'd like, but you'll only get this tax benefit every two years.

Home Sale Exclusion -- $250K for single taxpayers and $500K for married taxpayers

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Julie-Clark1Author

Thank you, Dawn;

We did own the home and lived there for several years. For your third point I'm not sure I understand it...we haven't sold any other homes for several years.

According to this is the full selling price of our home free and clear?

Sorry to be dense, but I appreciate your help!

DawnCAnswer

Employee

Search for home sale in TurboTax to be taken to the correct spot to enter a sale of a primary home. You should answer Yes on the following screen.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Carl11_2

Employee

The home sold for $749,000 and I have learned we will have to pay CG tax on the portion over $500k.

What is your cost basis in the house? Assuming you meet all other requirements, if it's $249,000 or more, then your taxable gain does not exceed $500K and therefore not taxed.