What is capital-gains tax on a home sale?
Written and reviewed by Andrew Ragusa, Licensed Real Estate Broker and Broker of Record, REMI Realty LLC — 11+ years of transactions across Long Island, Brooklyn and Queens.
The short answer
Capital-gains tax applies to the taxable gain on a sale, not to the entire sale price and not to the cash you have left after paying off the mortgage. In general, the gain is calculated from what you sell for, less your selling expenses, compared with your adjusted tax basis in the home.
Many homeowners can exclude some or all of that gain. Eligible homeowners may exclude up to $250,000 of gain, or up to $500,000 for qualifying married couples filing jointly. Ownership, use and other rules apply. Usually you must have owned the home and used it as your main home for at least two of the five years before the sale, and not every sale qualifies. The IRS explains the rules in Publication 523.
I can’t calculate anyone’s tax, because the answer depends on your specific facts. For tax questions, I recommend Joshua Kreitzman, the accountant I personally work with.