SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. Selling your home to downsize can make your retirement more financially stable, but if you have a profit on the sale you might owe capital gains taxes. Fortunately, in many cases those selling their primary residence who are single can exclude $250,000 from capital gains taxes, while married couples filing jointly can exclude $500,000. Employing this exclusion can reduce or eliminate capital gains taxes si ...

Core Points - The article discusses the potential capital gains tax implications when selling a home, emphasizing that whether tax is owed depends on specific criteria met by the seller [2][3]. Summary by Sections Tax Exclusion Criteria - The IRS allows single filers to exclude up to $250,000 of capital gains from the sale of their home, while married couples filing jointly can exclude up to $500,000, provided they meet certain criteria [3][7]. - To qualify for the exclusion, the seller must have owned the home for at least two of the five years preceding the sale, used it as their primary residence for at least two of those years, and not claimed the exclusion in the two years prior to the sale [7]. Examples of Tax Implications - In a scenario where a married couple sells their home for $504,999 and nets $400,000, they qualify for the $500,000 exclusion and thus owe no capital gains tax [5]. - Conversely, if a single individual sells the same home and nets $400,000, they only qualify for a $250,000 exclusion, resulting in $150,000 subject to capital gains tax. Assuming a tax rate of 15%, this would lead to a tax payment of $22,500, leaving net proceeds of $377,500 [8][9].