Whether you’ll pay taxes—and if so, how much—depends on how long you’ve been in your home. If you’ve lived there for at least two of the last five years, you can pocket up to $250,000 in profits tax-free; $500,000 for couples filing jointly. Anything over that, you’ll pay capital gains taxes.
For assets owned less than a year, you’ll pay taxes at your regular tax rate. Long-term gains are taxed depending on your income; nothing up to $72,500 (couples), 15% up to $450,000, above that it’s 20%.
To calculate your gain, first subtract selling expenses, such as agent commissions and other closing costs, from the sale price. Then you need to calculate your “basis.” This is what you paid for your home, plus some of the closing expenses from the purchase, such as title insurance and recording fees (but not loan points or lender fees), and the costs of any permanent improvements, like a swimming pool or new addition. See IRS Publication 523 for complete details.
There are some exceptions to the two-year rule. If you become disabled, are forced to sell because of a job relocation that requires you to move at least 50 miles away, need to seek medical treatment or care for a sick relative, or other “unforeseen circumstances,” you can pro-rate the taxes on the profit. Check IRS rules and consult a tax advisor. It’s complicated.
No copyright infringement intended. This article was originally published at Time.com.