I have lived in my property for approximately 7 years now...if I sell this property, will I be tax-free?

Answer 1

If this property is your main home, and you have owned and lived in it for two years in the five year period prior to the sale, then you can exclude gain on the property:

$250,000 if not married
$500,000 if married

The gain is the difference between the selling price and your investment in the property. If your gain is completely excluded because it is under the limits stated above, you do not have to report the sale to the IRS. If your gain is above the limits, you have to report the sale on Schedule D and pay capital gains tax (max of 15%) on the excess gain.

You cannot have used this exclusion in the two years prior to the sale. If you used your property for business purposes, some of the gain may be taxed due to depreciation. This may reduce your tax-free exclusion.

Answer 2

If you owned it and lived in it as your principal residence for 2 of the 5 years immediately prior to the sale you may be eligible to exclude some or all of the gain from taxation. The exclusion amount is $250,000 if your filing status is Single or Head of Household and $500,000 if your filing status is Married Filing Jointly.

Answer 3

Assuming you have also owned it for at least two of the five years just before the sale, the first $250,000 of gain will not be taxed - $500,000 on a joint return.