I have owned my home for over a year and am interested in selling it, how do capital gains work?

Answer 1

other people already describe the cases where you meet the special exemption. but if your current ownership/residency is less than 2 full years, you are generally not qualify for the special $250/$500k exemption unless you meet a certain special conditions. special conditions being relocation due to medical condition, change in job location (more then 50 miles) and unforeseen circumstances. if you meet one of the special condition, you will be able to take partial exemptions. let's said you live in your old home for 13 months and your new work is more than 50 miles away from your old home, and you site it as your primary reason why you sold the old home, you will qualify for exemption of $270,829 ($500k/24*13), or $135,421 if you are single.

Then there is capital gain tax rates if any part of your gain is not absorbed by the special exemption. Generally the rates are 10$-15% (federal, depend on your gross income of the year) and ?% for your state. but because of the nasty AMT (alternative minimum tax), your federal rate can swollen to 20% before you know it. check with your tax guy to run a what-if analysis.

Answer 2

If it has been your primary residence for at least 2 of the last 5 years, you are probably eligible to exclude up to $250,000 of gain from income for tax purposes. If you are not eligible for the exclusion, your gain is a long term capital gain. The amount of the gain is the sales price less selling expenses minus your cost basis in the home. The link below is IRS publication 523 Selling Your Home (2006 version). It will help you figure your gain.

Answer 3

For any sale of your home after May 7, 1997, capital gains are unlikely to be a problem.

You can now exclude up to $250,000 of the gain on the sale of your house -- $500,000 for a married couple. And you'll be able to exclude that much again if you sell another house after another two years. You must have lived in the house for at least two of the last five years.

Answer 4

Since you have held it for more than one year any gain would be long term and taxed at 15% federal plus any state tax. If you wait for another year and then sell at a gain there would not be any tax on the first $250,000 of gain.
If you sell at a loss then such a loss would not be deductible as this is your personal residence.
If the property would sell at a loss you could convert it to a rental and sell it after a couple of years and the loss would then be deductible.