When you sell a stock, you owe taxes on your gain—the difference between what you paid for the stock and what you sold it for. The same is true with selling a home. There are special considerations:
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:
Since 1997, up to $250,000 in capital gains for a single individual and up to $500,000 for a married couple on the sale of a home is exempt from taxation when you meet the following criteria:
* You have lived in the home as your principal residence for two out of the last five years
* You have not sold or exchanged another home during the two years preceding the sale.
* You may also qualify for this exemption if you meet what the IRS calls unforeseen circumstances such as job loss, divorce, or family medical emergency.
Disclaimer: The contents of this page are for informational purposes only and do not replace the advice of your tax advisor. For more information contact your tax advisor.