If I make under $40,000 a year do I have to pay capital gains tax on a home I lived in for 5 years and recently sold?

Forum|Forum|3 years ago
July 24, 2023
10 replies
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Mike9241

Level 15

no one can answer because you didn't provide the profit or other info. as single you would likely be able to exclude $250,000 of the gain. see IRS PUB 523 for more info.

ttps://www.irs.gov/pub/irs-pdf/p523.pdf

Mike9241

Opus 17

Level 15

Possibly, it depends on how much gain you have. If you owned the home at least 2 years and lived in the home at least 2 of the past 5 years, the first $250,000 of gain is tax-free. This is the section 121 home exclusion. Any gain over that will be taxed according to the normal rules. Your gains are added to your other income to determine your capital gains rates. For example, the top of zero percent rate for 2023 is $44,625. If your other income was exactly $40,000, then the first $250,000 of gains is excluded, the next $4625 is tax-free, and anything more than $254,625 is taxed at 15%.

redhottiescottieAuthor

Level 2

So my taxable income at the end of every year is around $25,000. I sold the home for $500,000. I owed $164,000 on that home. I cleared around $308,000. I immediately purchased another home for $273,000. I lived in the 1st home for 5 years and was my primary residence. I am a widow so I'd fall under the single status.

VolvoGirl

Level 15

But what is the gain? It's not what you owed or the net proceeds but the purchase price 5 years ago. Mortgage doesn't matter. Your gain or loss is just the sales price minus cost. And buying another house doesn't matter anymore.