Most people who sell the home they live in owe no federal tax at all, thanks to the primary residence exclusion of $250,000 in gains for singles and $500,000 for married couples. The details, and the exceptions, are worth ten minutes of your attention before closing. This guide is general information, not tax advice; confirm your case with a CPA.
KEY FACTS FROM THIS GUIDE
- A written cash offer should show comps, repair estimate and margin, every time
- All closings run through licensed title companies (OH, TX) or closing attorneys (GA)
- Never sign a deed outside a closing; never pay a fee to sell your house
- Primary-residence gains up to $250,000/$500,000 are usually tax-free (IRC 121)
The primary residence exclusion, in one example
You bought for $150,000, lived there 6 years, and sell for $260,000. Your gain is $110,000, far below the $250,000 exclusion, so the federal tax bill is zero. The requirement: you owned and lived in the house for 2 of the last 5 years.
What about state taxes in Ohio, Texas and Georgia?
Texas has no state income tax. Ohio and Georgia tax capital gains as regular income but honor the federal exclusion, so an excluded gain is generally not taxed by the state either.
A written offer costs nothing and decides nothing yet. Written numbers, licensed title company closings, zero pressure.
Selling an inherited house
Inherited property receives a stepped-up basis: its tax value resets to the market value at the date of death. Sell soon after inheriting and there is usually little or no gain to tax, even without living in it.
Selling a rental or investment property
Different rules entirely: gains are taxable, prior depreciation is recaptured at up to 25 percent, and the exclusion does not apply. A 1031 exchange can defer everything if you reinvest in another investment property on a strict timeline. This is the situation where a CPA earns their fee.
Do liens, back taxes or foreclosure change your income taxes?
Paying off debts at closing is not additional taxable income to you. Forgiven debt in a short sale can be, so ask about the Mortgage Forgiveness rules if your payoff exceeds the price.
Get a free written cash offer here, or book a free consultation if you want to talk it through with a real person first.
