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You are correct that the IRS lets individuals exclude up to $250,00 in profits from the sale of a primary residence from taxes. Married couples filing their taxes jointly can exclude up to $500,000.
If they were to sell the house, they would pay capital gains taxes on $400,000: Sale price ($500,000) – Original cost basis ($100,000) = $400,000 Instead, however, they die and pass the house ...
Therefore, if the taxpayer's sister were to sell the house for $100,000, she would not have to pay any income tax because the sales price ($100,000) minus her stepped-up basis ($100,000) would be a capital-gain income of zero. See the explanation under "Rationale for stepped-up basis" (below) for an explanation of why the Tax Code would do this.
Once upon a time, that meant few homeowners had to worry about capital gains taxes on the sale of their home. But the exclusion amounts haven’t changed since they were created in 1997, even as ...
The estate of a person who died in the year 2010 would have been entirely exempt from tax while that of a person who died in the year 2011 or later would have been taxed as heavily as in 2001. On December 17, 2010, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Section 301 of the 2010 Act ...
The top marginal long term capital gains rate fell from 28% to 20%, subject to certain phase-in rules. The 15% bracket was lowered to 10%. The 15% bracket was lowered to 10%. The act permanently exempted from taxation the capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles.
A single person who nets $620,000 from their home sale could pay capital gains taxes on up to $370,000 of the profits, while a married couple who files their taxes jointly could end up owing taxes ...
You can sell your primary residence and avoid paying capital gains taxes on the first $250,000 of your profits if your tax-filing status is single, and up to $500,000 if married and filing jointly.