Capital Gains Tax on Home Sale Calculator

Up to $250,000 of gain is excluded from tax if you file single, married filing separately, or head of household, and up to $500,000 if you file married filing jointly — provided you owned AND used the home as your main home for at least 2 of the last 5 years before the sale (IRS Publication 523). Gain above the exclusion is taxed as a long-term capital gain at 0%, 15%, or 20%, plus the 3.8% Net Investment Income Tax if your income is high enough.

You must have owned the home for at least 2 of the 5 years immediately before the sale, AND used it as your main home for at least 2 of those 5 years. The two 2-year periods do not have to be the same 2 years and do not have to be continuous. You generally can't claim the exclusion more than once every 2 years.

Yes, if the sale is due to a change in employment, health, or certain unforeseen circumstances (IRS Publication 523, "Reduced Maximum Exclusion"). The exclusion is prorated: multiply the full $250,000/$500,000 limit by the number of qualifying months you owned and used the home, divided by 24. For example, meeting the test for 12 of the required 24 months on a single filer gives a $125,000 exclusion instead of $250,000.

Gain equals the amount realized (selling price minus selling expenses like agent commission, title fees, and closing costs) minus your adjusted basis. Adjusted basis is your original purchase price plus capital improvements (a new roof, an addition, a kitchen remodel — not routine repairs or maintenance), minus any depreciation you claimed if the home was ever rented out or used for business.

Depreciation you claimed while the home was a rental is never eligible for the Section 121 exclusion (IRC Section 121(d)(6)). That portion of your gain is taxed separately as unrecaptured Section 1250 gain, at a rate capped at 25% (it can be lower if your ordinary tax bracket is below 25%, but never higher). Only the remaining appreciation-based gain gets the $250,000/$500,000 exclusion and the standard 0/15/20% long-term capital gains rates. Separately, if the rental period came BEFORE you ever used the home as your main home, the "non-qualified use" rule (IRC Section 121(b)(5)) also carves out a pro-rata share of the appreciation gain from the exclusion — see the next question.

IRC Section 121(b)(5) denies the exclusion for gain allocated to any period after December 31, 2008 during which the home was NOT your main home — most commonly, renting the property out as an investment BEFORE ever moving in and using it as your primary residence. The allocation is by months: non-qualified-use gain = total gain (after carving out any depreciation recapture) × (non-qualified-use months ÷ total months owned). That share is taxed as an ordinary long-term capital gain and can never be excluded, even if your total gain is well under the $250,000/$500,000 limit. Two things do NOT count as non-qualified use: any vacancy AFTER the last day you used the home as your main home (moving out shortly before selling doesn't taint your exclusion), and qualifying temporary absences (up to 2 years for job/health/unforeseen circumstances, or up to 10 years of qualified official extended duty). This is a separate rule from depreciation recapture — both can apply to the same former-rental sale.

The 3.8% NIIT can apply to the taxable portion of your gain (after the Section 121 exclusion) plus any depreciation recapture, but only if your modified adjusted gross income exceeds $200,000 (single/head of household) or $250,000 (married filing jointly). Excluded gain under Section 121 is never subject to NIIT — it's not counted as net investment income at all.

Yes, with conditions. To claim the full $500,000 MFJ exclusion: either spouse can meet the ownership test, but BOTH spouses must meet the use test, and neither spouse can have used the Section 121 exclusion on a different home sale within the last 2 years. If only one spouse meets the use test, the exclusion is limited to that spouse's $250,000.

A surviving spouse selling within 2 years of the other spouse's death — and who hasn't remarried — can still claim the full $500,000 exclusion (as if still filing jointly), as long as the ownership and use tests were met (by either spouse) before the date of death and neither spouse excluded gain on another home sale within the 2 years before death (IRC Section 121(b)(4); IRS Publication 523, "Rules for Widows and Widowers").