Make the Most Of the Home-Sale Tax Break
Third in a series of articles
"The hardest thing in the world to understand is the income tax."
-- Albert Einstein
Selling your house used to be easy. You listed it with a real estate agent, and in a few days you were deluged with offers -- some higher than your offering price.
Today, a house can sit on the market for weeks or months before you get an offer. And your potential buyer must jump many hurdles and have an excellent credit rating to get a mortgage loan commitment.
But when the house finally sells, you can take advantage of one of the greatest tax breaks available: If you make a profit, a big chunk of it is tax-free.
If you have owned and lived in your principal residence for two out of the five years before it is sold, up to $500,000 of any profit can be excluded from federal capital gains tax if you are married and file jointly. (It's $250,000 for taxpayers who are single or married filing separately.)