Capital Gains Taxes Upon Sale of a House
When you sell a house, you need to determine if you made a profit on the sale. If so, you will need to figure out how much you owe in capital gains taxes.
Figuring Out Capital Gains
Generally speaking for federal tax purposes, the first $250,000 (for single taxpayers) or $500,000 (for married, filing jointly) on the sale of a primary residence is not taxable. So if you paid $550,000 for the house and sold it for $700,000, you won't owe anything. However, once you get outside the exemption, things get a bit more complicated because you have to figure out your cost basis. The IRS has several publications that you can read. IRS Publication 523 gives you details on how to figure out your capital gains. You can also consult your tax advisor.
Deferring Capital Gains
If you don't need all of the money from the sale of your house at the time of closing, there is a way that you can defer paying the capital gains taxes, spreading it out over time. Note I said "DEFER", not avoid. Call me if you are interested in finding out more.