Do you pay taxes when you sell your home? It depends . . .

In this crazy market it’s not unusual to hear about a home that sold just a few years ago selling again for considerably more money. So if you’re lucky enough to be in that position, do you have to pay taxes on the gain? Under the current IRS code, you can exclude up to $250k as an individual or $500k if you file jointly with your spouse. But, you also have to have owned and lived in the property as your primary residence for at least two of the past five years. Remember, the “gain” is not simply the difference between what you sold it for and what you bought it for. Your gain is what you sold it for less the “basis” of your home, which takes into account improvements (not repairs) that you’ve made. So regardless of whether you plan to sell soon, it’s a good idea to keep accurate records of the improvements that you’ve made so that you can document it when the time comes. You should consult your accountant for the details, but the basic rules and exceptions can be found at www.irs.gov/taxtopics/tc701.