I deal with this stuff every day so I think everyone knows these things!
I had someone ask me about paying income tax (capitol gains tax) on any profit from the sale of their personal home. I had great news for them!
The 1997 taxpayer relief act made a big difference in the tax liability of those who sell their primary residence. As it stands today, almost no one will pay any federal taxes on the profit made from the sale of the home they live in. (defined by the Internal Revenue Service simply as the place you live most of the time Internal Revenue Code IRC Section 121). To qualify, you must have owned and occupied the home as your primary residence for a minimum of any two of the five years before you sell.
A single owner can take up to $250,000 gain free of any federal or state tax.
A married couple, filing jointly can take up to $500,000. gain free of any federal or state tax. Even if only one of them owns the property, the full $500,000. is available only if the non-owner spouse occupied the property for the required 2 years.
You can even use part of the exclusion if you were in the house less than the full two years. If you move is required by one of three reasons: job transfer, health reasons, or some unforeseen reason.
Don't confuse this with the once in a lifetime thing they used to allow for those over 55, this can be done over and over again as many times as you qualify for it! Ask your tax guy for details.
