capital gains - money in house sale

Lifetime Capital Gains Exclusion on Primary Residence

Everyone who owns a home that is their primary residence is entitled to a lifetime exclusion on taxable gains from the sale of their primary residence of $250,000 for individuals and $500,000 for a couple. The taxable gain exclusion requirements are:

  • The home was your primary residence for two out of the last 5 years
  • You’ve owned the home for two out of the past five years
  • You did not use the home sale exclusion in the past two years

To calculate the gain: subtract selling expenses and your adjusted cost basis from the sale price.  The adjusted basis is what you paid for the home plus the cost of improvements. By tracking improvements, you can, in many cases, significantly reduce your taxable gain when you sell the home. 

Importance of tracking home improvements