Capital gains
The profit from selling a property or other asset for more than you paid. Taxed at different rates depending on how long you owned it. Long-term rates apply after one year.
Your Room opens on going under contract and closing, with the offer and everything before it already ticked.
Organize my saleFree to set up. Pay once when you list: $89 or $189. 7-day refund.
See how it worksWhere this comes up in a sale, and what follows
- Closing day (comes before)
Part 1 of 4
Why a seller cares
Federal law generally lets a seller who has owned and lived in the home for two of the last five years exclude a large part of the gain. Whether and how much applies to you is a question for a tax professional, and it is worth asking before you set a closing date.
Part 2 of 4
A simple example
Bought for $180,000, sold for $310,000, lived in for six years. Much or all of the $130,000 gain may be excluded under the federal rule, depending on filing status and the details.
| The situation | How the gain is commonly treated |
|---|---|
| Your primary home, lived in two of the last five years | Up to $250,000 excluded, $500,000 for a married couple filing jointly |
| A rental you never lived in | Taxed as a long-term gain, plus depreciation recapture |
| A home owned less than a year | Short-term, taxed as ordinary income |
The gain is the sale price minus what you paid and what you put in. Whether it is taxed depends on how you used the home.
Part 3 of 4
What people get wrong
That the whole sale price is the gain. The gain is the profit after the purchase price, improvements and selling costs.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · read against IRS Topic 701: sale of your home · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines capital gains in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
Organize my saleFree to set up. Pay once when you list: $89 or $189. 7-day refund.