Tax Consequences for a Home Sale

This week I received a repeat question concerning capital gains taxes incident to the sale of a home.

Here's what the IRS tax code states if the house you're selling is your personal residence:

• Once every two years a couple ($500,000) or single homeowner ($250,000) has a capital gain exclusion if the home being sold is your personal residence. Capital gains at the 15% rate will be due if these values are exceeded. Capital gains is the difference between the basis and the sale price. The tax is due upon sale in that tax year, not deferred.

The tax code was changed in 1997. The previous system was the one-time $155,000 exemption which allowed the capital gain to be deferred. This is no longer true.

Whenever you sell your home, you must file the appropriate tax forms for the year in which you sold your home, whether or not you realized a capital gain.