Hello,
When I sell my California primary residence, how do I calculate capital gains for the State of California and the federal government?
Also, where can I obtain a list or the criteria relative to what expenses are deductible for lowering capital gains?
Thx
Hi Blackstone2015! Great questions!
The good news is that, assuming you owned and lived in your home for 2 of the 5 years prior to the sale, most of the profits (capital gains) from the sale aren't taxable. That is, if you file as Single, you can exclude up to $250,000 from the gain and, if you're married filing jointly, you can exclude up to $500,000 of the gain. This is true for your federal and your California returns.
Plus, if you itemize your taxes, you can deduct various other related expenses, such as mortgage interest, insurance, points, property taxes, etc. This responds to your second question regarding expenses to reduce your capital gain from the sale of your home (if it's not entirely excluded as noted above.)
Please take a look at these articles:
I hope this helps!