Calculating my tax liability (capital gains) when I sell my house

[BF85]

In 2016 I bought property/house and in 2020 I took out a HELOC and in 22 converted to a fixed rate home equity loan. I believe I cant count the basis of the HELOC on capital gains but can I deduct the home equity loan? The pay off is coming out of the proceeds of the sale and I’d like to have it count towards offsetting my capital gains . 

[Anonymous_]

Your question is somewhat unclear, but if you are wondering whether you can deduct the (payoff) balance of a loan on your house from the sales price to offset your capital gain, that is not possible (i.e., it is not the way capital gains are calculated).

In order to arrive at your total capital gain on the sale, you would deduct your cost basis (typically what you paid for the house plus the cost of any improvements made) from the sales price (less selling costs); you cannot deduct the payoff of the loan.

[NCperson]

@BF85 - the mortgage(s) have nothing to do with determing capital gains.  That is true for mortgage related costs incurred when purchasing the home and any costs related to refinances along the way or the payoff the loan.

Capital gains is simply: 

1) selling price less selling costs (the commission is normally the "big one".)  

minus  

2) purchase price plus capital improvements. 

[Hal_Al]

The capital gain on the sale of your primary residence is tax free, up to $250,000 ($500,000 married filing jointly) if you owned and lived in the home for two years, out of the 5 years prior to the sale. 

Reference: https://www.irs.gov/taxtopics/tc701