I live in Calif, I have owned my home 42 years, I paid $100,000 for it, now if i sell it at $900,000 will $300,000 be capital gains?

[VolvoGirl]

Yes if you are married.   But you've probably made improvements over the years like a new roof?  You can add improvements to your cost.   

For a primary home, if you owned and lived in your house for 2 out of the last 5 years when you sell you can exclude the gain up to $250,000 for single or 500,000 for married from tax.  You can not take a loss on your tax return.  If you made more than a 250,000 (500,000 for joint) gain then the amount over it is taxed.

IRS pub 523 house sale.  Figuring Gain or Loss on page 8.

http://www.irs.gov/pub/irs-pdf/p523.pdf

[NCperson]

it depends..... are you married and if so, is your spouse still alive? 

if there is a spouse who passed, the 1/2 the cost basis would have 'stepped up' at their death, so the math could be different and the gain could be less than $300,000.

what is prompting you to want to sell? depending on the answer, there could be other solutions than selling and paying the capital gains tax.  Understand that even if the capital gains is $300,000, tax federal tax is  around 15% (part of the gain will be subject to 3.8% NIIT) plus CA tax (assume in the 10% range), so about $75,000 - $80,000. 

[mrose155]

Yes I am married, and he is alive.  Just can't imagine being taxed on $300,000 dollars.  But hearing that improvements can be added to the cost basis is good.

[NCperson]

@mrose155 - so the capital gains is calculated as 

1) sales price less sales expenses (largest is normally the sales commission)

2) purchase price plus improvements during ownership

1)-2) is the gain.  From that subtract $500,000 and the rest is subject to capital gains tax. 

note on the improvements, you may have,for example, replaced the roof multiple times.  If you run into that situation it is only the LAST replacement that is considered an improvement.