We will be selling our home in upsate NY (primary residence) and will use any profits for the downpayment on the new home in NY. How does this sale effect our taxes?

[Justsomebody]

I heard that if you sell your home and use any "profits" on your next home, it is treated differently than if you sell your home and pocket the profits.

[AmyT · Accepted solution]

For your federal taxes, as long as the home sold was your primary residence for at least two out of the last five years and the gain on the sale was less than $500,000 (married filing joint)/$250,000 (single), then there are no tax consequences to selling your home.  

If the gains are more than these amounts, you will pay captial gains tax (at a lower rate than your ordinary income tax rate) on the amount of gain in excess of these amounts.

Please note that if you receive Form 1099-S for the sale, you will need to report it even if it will not be taxable.

The law to which you are referring is the "old" law that was replaced by the exclusion above.