We just sold our house, when do we have to pay the IRS?
Q: If we sell our house and make money, how long do we have before we need to buy our next house or pay capital gains tax?
A: Capital gains taxes as they apply to your principal residence can be found in IRS Publication 523.
If you have lived in your home for two of the five years leading up to the date of sale, you are exempt from taxes on capital gains realized by the sale of the home. There are limits, though, of $250,000 in gains for a single filer and $500,000 for a joint return.
You can only exclude gains from the sale of a home every two years -- that is, if you sold a home last year and excluded the gains from tax, you cannot exclude the gains made on this house. You would have to wait at least another year before this home becomes eligible to be excluded.
Publication 523 has worksheets and tips to help you figure out your basis cost and what your gains actually will amount to once you've subtracted selling costs, certain improvements and more.
A 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.