~4 minute lesson · Beginner · Selling a Home
Home sale taxes: gain is different from proceeds
The Short Answer
Understand the basic framework and collect records before tax time.
How It Works
Start with gain, not the bank deposit
A simplified gain calculation subtracts selling expenses and adjusted tax basis from the sale price. Basis often begins with acquisition cost and is adjusted for qualifying improvements and other items. Your remaining mortgage affects the cash you receive, but it is not the same as basis.
An exclusion has eligibility conditions
Federal rules may allow eligible sellers to exclude up to $250,000 of gain, or up to $500,000 for qualifying married couples filing jointly. Ownership, use, and prior-sale requirements apply; a common framework is two years of ownership and use within the five years before sale. Joint-return eligibility and exceptions require closer review.
Keep records and review special cases
Save purchase and sale statements, improvement receipts, and records of rental or business use. Depreciation, inherited or gifted property, partial exclusions, and California differences can change the result. Real estate withholding is a tax prepayment, not necessarily the final liability. Consult a qualified tax professional using the rules for your sale year.
What to Remember
- Start with gain, not the bank deposit
- An exclusion has eligibility conditions
- Keep records and review special cases
Keep acquisition, improvement, and sale records; calculate tax gain separately from cash proceeds.