# Income Taxes when selling a house **URL:** \ **Category:** Factual Questions\ **Created:** [May 21, 2003, 12:40am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440 "2003-05-21T00:40:38Z")\ **Posts on this page:** 7\ **Page:** 1
**Author:** ![JillGat](https://avatars.discourse-cdn.com/v4/letter/j/9fc29f/32.png) [@JillGat](https://boards.straightdope.com/u/JillGat)\ **Post date:** [May 21, 2003, 12:40am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440/1 "2003-05-21T00:40:38Z")
We live in another country and want to sell our house in the US. As we won’t be rolling the profits into another house right away, will we be socked with big taxes on it? Any way to avoid this? ---
**Author:** ![Pelleas](https://avatars.discourse-cdn.com/v4/letter/p/e8c25b/32.png) [@Pelleas](https://boards.straightdope.com/u/Pelleas)\ **Post date:** [May 21, 2003, 12:55am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440/2 "2003-05-21T00:55:51Z")
Was the house used strictly as a residence or is it rental property? Property used as a residence is pretty much exempt from capital gains tax regardless of whether you purchase a new one. However, if it can be considered rental property then it gets much more complicated. It would probably be a good idea to consult an accountant. ---
**Author:** ![Pelleas](https://avatars.discourse-cdn.com/v4/letter/p/e8c25b/32.png) [@Pelleas](https://boards.straightdope.com/u/Pelleas)\ **Post date:** [May 21, 2003, 12:57am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440/3 "2003-05-21T00:57:18Z")
You would still have to report the sale on your tax return. ---
**Author:** ![pkbites](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pkbites/32/204_2.png) [@pkbites](https://boards.straightdope.com/u/pkbites)\ **Post date:** [May 21, 2003, 1:01am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440/4 "2003-05-21T01:01:21Z")
IANAL, so first, talk to a good real estate attorney as well as a tax lawyer. The capital gains law was changed in the mid 90’s and basically it states that if you lived in the house 2 out of the last 5 years a single person doesn’t have to pay tax on the first 125k profit, a couple (married or otherwise I believe) is 250k profit. This is regardless if you roll it into another property or not. Let me tell you, that law helped my wife and I sell a large house we had, pocket a huge profit, and move into a smaller investment property we had. We had 2 lawyers though. You should have at least that many. Good luck! ---
**Author:** ![pkbites](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pkbites/32/204_2.png) [@pkbites](https://boards.straightdope.com/u/pkbites)\ **Post date:** [May 21, 2003, 1:05am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440/5 "2003-05-21T01:05:21Z")
> [@](#): > > \*Originally posted by Pelleas \* > \*\*Property used as a residence is pretty much exempt from capital gains tax regardless of whether you purchase a new one. \*\* Not so **Pelleas**. Only the first 250k for a couple. If they have a house that brings in more than that worth of profit (not hard to do now days) there may be a tax consequence. The change in the law helped open up real estate in the mid 90’s. A lot of older people who bought their house many years ago were afraid to sell due to capital gains. The “one time exemption” has been eliminated. ---
**Author:** ![Pelleas](https://avatars.discourse-cdn.com/v4/letter/p/e8c25b/32.png) [@Pelleas](https://boards.straightdope.com/u/Pelleas)\ **Post date:** [May 21, 2003, 2:44am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440/6 "2003-05-21T02:44:59Z")
You’re right **pkbites**. I had intended to mention the upper limit but overlooked it. However, I was thinking it was higher than $250,000. Glad you cleared that up. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [May 21, 2003, 5:31am UTC](https://boards.straightdope.com/t/income-taxes-when-selling-a-house/176440/7 "2003-05-21T05:31:26Z")
> [@](#): > > If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return, according to the IRS. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years. > > To be eligible for this exclusion, your home must have been owned by you and used as your main home for a period of at least two out of the five years prior to its sale. You also must not have excluded gain on another home sold during the two years before the current sale. > > If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount. > > To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use. Longer breaks, such as a one-year sabbatical, do not. The Horse’s Mouth: [http://www.irs.gov/newsroom/article/0,,id=106951,00.html](http://www.irs.gov/newsroom/article/0,,id=106951,00.html) [For more details and information, download a copy of Publication 523, Selling your Home, or order a copy by calling 1-800-TAX-FORM (1-800-829-3676).](http://www.irs.gov/pub/irs-pdf/p523.pdf)