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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.
Capital gains taxes are paid when you sell an asset. They are levied only on the profits (if any) that you make from this sale. For example, say that you buy a stock for $10.
Normally, when someone receives an asset from a taxpayer before he dies, the person who receives the asset keeps the same basis in the asset that the taxpayer, the donor, had. For example, if a taxpayer's sister Mary were to receive this house from the taxpayer before he dies, then her basis in the house would also be $35,000, no matter what ...
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 ...
From 1998 through 2017, tax law keyed the tax rate for long-term capital gains to the taxpayer's tax bracket for ordinary income, and set forth a lower rate for the capital gains. (Short-term capital gains have been taxed at the same rate as ordinary income for this entire period.) [ 16 ] This approach was dropped by the Tax Cuts and Jobs Act ...
Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property, a process known as a 1031 exchange.
As long as you lived in the property as your primary residence for 24 months within the five years before the home’s sale, you can qualify for the capital gains tax exemption.
If you sold the stock for $340,000 at that time, you'd only have to pay capital gains taxes on $4,000. Estate taxes would only be a concern if their estate crosses the threshold.