How do you know if you can qualify to be exempt from capital gains tax? Actually, there are a few different stipulations involved.
I want to take some time to answer a question I’m receiving a lot lately, which is “How can I be exempt from capital gains?”
A lot of sellers right now feel nervous about listing their homes since values in our area have gone up so much. These sellers are worried about the taxes they’ll need to pay on the gains they earn from the property.
Truthfully, there are a few stipulations that need to be considered.
In order to be exempt from capital gains tax, the property will need to have been your primary residence for two out of the last five years. These years do not need to be consecutive.
Also, you can’t have exchanged or sold within the last two years, and the property cannot have been used for business or rental purposes.
If you are an individual, sales price must not exceed $250,000. If you are a married couple, the sales price cannot exceed $500,000. To learn more information on this, I found this article to be very helpful.
Finally, the last stipulation is that the property cannot be involved in a 1031 Exchange. A 1031 Exchange is an elevated way of deferring gains for investors. Chances are, this isn’t something most sellers are going to be involved in.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.