How are home sale gains exceeding $250,000 taxed?
May 3, 2004
Subject: Question on selling my first home
Date: Thu, 29 Apr 2004
I’m selling my first home. I know that I qualify for a $250,000 exclusion as a single person who meets the requirements. How is any gain exceeding $250,000 taxed?
Some people told me that if I invest the excess gains in other real estate, I can avoid any tax. Is that right?
Date: Fri, 30 Apr 2004
Assuming you have only used the home as a principal residence and not claimed any depreciation deduction with respect to the home, any excess gain will be taxable as long-term capital gains, eligible for a 15% maximum federal tax rate. Individuals in the 10% or 15% brackets are eligible for a 5% tax rate for part of the gain.
A sale of a principal residence doesn’t qualify for a tax-deferred exchange, so investing in other real estate won’t help you avoid tax on the gain.
We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.
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