So for most people, the magic two year mark really is just that it makes them eligible for an exception to capital gains if the house is their primary residence. Therefore, these taxpayers avoid (a big chunk of) capital gains when selling a home, since sellers can write off up to $250,000 in capital gains tax (or $500,000 for couples), so long as they've lived in their home for two years or more. But if you're selling before then, you'll be required to pay capital gains tax.
Your capital gains tax rate can be 0%, 15% or 20% depending on your income and your tax filing status. For example, let’s say you bought your home for $150,000 and you sold it for $180,000. Your profit, $30,000 (the difference between the two selling prices), is your capital gain and it’s subject to the tax.
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