SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. Selling your longtime home and downsizing in retirement is a common practice for people entering their golden years. While profits from a home sale are considered capital gains, the IRS typically allows you to exclude part of the profit – if not all of it – from your taxes. But what if you sold your home and pocketed as much as $640,000? You could still end up owing a hefty capital gains tax bill on the s ...