The determination of whether you'll be taxed on your capital gains depends upon a few factors. The tax code provides for an exclusion of up to $500,000 in capital gain for married filing jointly, $250,000 for others. To qualify for the exclusion, you must have lived in the residence for at least two of the past five years. And, you must not have used the exclusion on another home for two years prior to the current sale. If you meet those criteria, the first $500,000 in gain is excluded from taxation. Additional details, as well as the possibility of a partial exclusion under exceptional circumstances, can be found in IRS Topic 701, with more details in Publication 523.
Nick K, EA
