Tax Implications of Selling a House

Before selling your home

If you are getting ready to sell your home, you’ll need to calculate the cost basis of your property for tax purposes. To determine your cost basis, if you saved Form HUD-1 (replaced with the Closing Disclosure form in 2015) from when you bought the house, add attorney fees, survey costs, agents’ commissions, title search costs, recording fees, and the transfer and stamp taxes you paid, to the price of the property. You should also add the cost of improvements to the property. This will help you determine your adjusted basis in the property once you finalize selling your home. You can also add in the various costs related to the sale of your home.

After you sell

If you sold your main home this year and you owned and lived in it for a total of two of the last five years, your profit from the sale may be tax-exempt. If you are single, up to $250,000 of profit may be tax-free; if you’re married, that number jumps to $500,000.  You don’t have to own the home and live in the home for the same time two-year frame during the five-year period. 

If you didn’t own or live in the home for two of the last five years, you may still be able to use a prorated exclusion amount in certain cases (e.g., if you move for work). The excludable amount is modified when a portion of the home is used for business purposes.