09/17/2026
It's Tax Tip Thursday!!!
๐ก TAX TIP: Selling Your Home? You May Not Owe Tax on the Profit!
Did you know? ๐
Selling your home for more than you paid for it does not automatically mean youโll owe income tax on the profit.
Under IRS Section 121, qualifying homeowners may be able to exclude up to $250,000 of gain from the sale of their main homeโor up to $500,000 for certain married couples filing jointly.
Generally, to qualify for the full exclusion, you must meet requirements that include:
๐ Ownership Test: You owned the home for at least 2 years during the 5-year period before the sale.
๐ Use Test: You used the property as your main home for at least 2 years during that same 5-year period.
๐
Previous Sale Test: Generally, you haven't excluded gain from the sale of another home during the 2-year period before this sale.
And here's one that surprises a lot of people:
โจ You do NOT have to immediately purchase another home or reinvest your proceeds into another property to qualify for the exclusion.
Your actual gain also isn't necessarily just:
Selling Price โ Purchase Price
Your adjusted basis, qualifying improvements, certain selling expenses, depreciation, and previous use of the property can affect the final calculation.
โ ๏ธ Special rules can apply if the property was rented, used for business, subject to depreciation, inherited, received in a divorce, or wasn't your principal residence for the entire ownership period. You may also have a reporting requirement even when the gain itself is excluded.
So before assuming, โI sold my house for a profit, so I'm going to owe taxes,โ have the numbers reviewed. ๐
Know More. Keep More.
๐ Essentials Tax: 234-222-2374
๐ essentialstax.com
๐ JLW Tax: 234-231-9141
More Than Taxesโฆ Weโre Essential to Your Future.
***All tax situations are different. This information is provided for general educational purposes and should not be considered individualized tax, legal, or financial advice. Consult a qualified tax professional regarding your specific circumstances.
