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House sale netting $400,000 may or may not trigger capital gains tax
The IRS home sale exclusion can cover up to $500,000 for married couples and $250,000 for single filers, depending on ownership, primary residence, and prior exclusions.
Yahoo Finance and SmartAsset outline how capital gains tax works for homeowners selling a primary residence, noting the IRS rule is often fact dependent, including whether the homeowner meets eligibility criteria for the home sale exclusion.
According to the guidance cited, single filers may exclude up to $250,000 of capital gains and married couples filing jointly may exclude up to $500,000, provided the home was owned for at least two of the five years before the sale, used as a primary residence for at least two of the five years, and the exclusion was not claimed in the two years immediately preceding the sale.
In an example where the seller nets $400,000 from a $504,999 sale after paying off the home, the story says a married couple filing jointly could qualify for the $500,000 exclusion, meaning no capital gains tax would be owed on those proceeds.
For a single filer in the same scenario, the outlet says only the $250,000 exclusion would be available, leaving $150,000 potentially subject to capital gains tax, which the article illustrates by assuming a 15% bracket.