home sale tax for inherited home

[EJBB]

My parent sold me the deed in 2007 for $1 and I just

sold the house yesterday. I sold the house for $195000.

I make under $20000 a year. How much capital gains tax can I expect to pay?

[DoninGA]

If you sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

[SharonD007]

It depends.  Was the home your primary residence?  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:

1. Ownership - You must have owned your home for at least two of the five years before you sell your home.
2. 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.
3. 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.

If your home sale was your second home, you will pay capital gains on the profit. You will calculate your profit by subtracting the adjusted cost basis plus selling expenses from your proceeds.

The IRS considers the home that your parent sold you as a gift.  Refer to the IRS FAQ What is the basis of property received as a gift? to help you determine the basis.