@clcRichard -your post is a little confusing.
everything hinges on the house you sell: buying another house has no bearing on the situation (it did through 1997 when the laws changed)
the capital gains is calculated as:
1) selling price of the house LESS
2) the purchase price of the house LESS
3) improvments you made to the home while you owned it LESS
4) the cost to sell the house (the commision is normally the big one) EQUALS
5) the capital gain
if this number is a loss, it is not deductible on your tax return
if this number is a gain, you MAY have to pay capital gains tax - and this is where you post gets murky. (What do you mean it was bought out from your parents?)
If you owned the home for less than 2 years and you are moving just because you want to, then you will pay tax on the gain..
if you owned the home for less than 1 year, then the tax is a short term gain and simply follows the ordinary income tax rates for your income level.
if you owned for between 1-2 years the tax is considered a long term capital gain and will follow the long term income tax rates for your income level.
if you owned the home (and lived in it) for at least 2 years, then the first $500,000 of the gain (I assume you are married) is exempt from tax.
