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How are home sale gains exceeding $250,000 taxed?

May 3, 2004

Subject:  Question on selling my first home
From:  John
Date:  Thu, 29 Apr 2004

Iím selling my first home. I know that I qualify for a $250,000 exclusion as a single person who meets the requirements. How is any gain exceeding $250,000 taxed?

Some people told me that if I invest the excess gains in other real estate, I can avoid any tax. Is that right?


Date:  Fri, 30 Apr 2004

Hello John,

Assuming you have only used the home as a principal residence and not claimed any depreciation deduction with respect to the home, any excess gain will be taxable as long-term capital gains, eligible for a 15% maximum federal tax rate. Individuals in the 10% or 15% brackets are eligible for a 5% tax rate for part of the gain.

A sale of a principal residence doesnít qualify for a tax-deferred exchange, so investing in other real estate wonít help you avoid tax on the gain.

Good luck!
Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

How are home sale gains exceeding $250,000 taxed?

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