Selling your home can bring more than moving expenses. If you make a profit, capital gains taxes may come into play. Many homeowners are surprised at how much these rules can affect their bottom line.
A few key points to know:
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You may qualify to exclude up to $250,000 in gains if single, or $500,000 if married and filing jointly, provided you meet the ownership and use requirements.
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Home improvements like additions and remodels increase your cost basis, which can reduce taxable gains. Simple maintenance or patchwork does not count.
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The tax impact differs if your property was your primary home, a rental, or inherited. Each scenario has its own rules.
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State taxes can still apply even when federal exclusions shield you from a portion of the gain.
Understanding these rules before you sell can save you thousands.