It depends, You may not have to pay taxes on the profits (up to $250,000 or $500,000 if MFJ) if you meet certain conditions.
The three tests that you must meet are:
- Ownership - You must have owned your home for at least two of the five years before you sell your home.
- Use - You must have used your home as a personal residence for at least two of the five years prior to the date that you sell your home.
- Timing - You can't exclude the gain of another principal residence that you sold within two years of the current sale.
If you meet these requirements, you don't have to pay taxes on the first $250,000 (500,000 if you are married and file a joint tax return). If your profit is more than $250,000 ($500,000 if MFJ) then, the excess is reported on Schedule D as a capital gain.
For additional information, refer to the TurboTax article Tax Aspects of Home Ownership: Selling a Home and the IRS article Topic no. 701, Sale of your home.
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