Something homeowners consider before selling their home is whether they will be paying capital gains taxes. While there are differences between states and municipalities there are some general guidelines homeowners can reference. Team Smith Wisconsin recommends first finding a great CPA and /or tax professional to advise you on your tax implications when selling your home.
“The 2 in 5 Year Rule:
The seller must have owned the home and used it as their principal residence for two out of the last five years (up to the date of closing). The two years do not have to be consecutive to qualify. The seller must not have sold a home in the last two years and claimed the capital gains tax exclusion.
Capital Gains Exclusion Amounts:
Single people can exclude up to $250,000 of the gain, and married people filing a joint return can exclude up to $500,000 of the gain.
(Widowed taxpayers may be able to increase the exclusion amount from $250,000 to $500,000 when meeting all of the following conditions.
- They sell their home within two years of the death of their spouse
- They haven’t remarried at the time of the sale
- Neither the seller or their late spouse took the exclusion on another home sold less than two years before the date of the current home sale
- They meet the two-year ownership and residence requirements.” - Investopedia
As stated above, the rules and regulations apply differently based on residence, marital status and ownership length of time.
https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp