Sale of home over $500k

[halpin54]

We are considering selling our home next year which should be over $500,000. I'm 68 and my spouse is 64. We would like to not have to pay capital gains on the amount over $500k if that is possible. Assuming that we are allowed up to $500k in capital gains in 2023.

What I would like to know, are we allowed to do a 1031 transfer of the amount above the $500k limit?

Thanks ,

Bill

[EleanoreS]

Good afternoon Bill.  It is not clear from your question if the sales price is over $500,000 or if the gain is over $500,000.  The $500,000 exclusion that would be available to you and your wife on a joint return is an exclusion of GAIN.  The gain would be determined by taking the sales price and subtracting your basis (which among other things includes your purchase price and cost of improvements).   Here is a link to a useful TurboTax article that gives great information on the selling a home and claiming the exclusion.

As to your question about a possible 1031 exchange; this generally applies to investment property.  Although your home is one of your biggest investments; it is not considered investment property under IRS rules.