Question:I want to sell my home that I have lived in for 5 years, do I need to pay capital gain tax?
Answer: If you have owned and used the property as primary residence for two years during the five year windows ending on the date of sale, you can exclude the gain upto $250,000 for single, MFS, $500,000 for married filing jointly.
You can exclude the gain only once every two years.
Capital gain calculation:
capital gain=selling price less some closing costs and settlement costs less adjusted cost basis.
adjusted cost basis=purchasing price plus some closing costs and settlement costs plus improvement less depreciation
The amount more than the exclusion will be taxed as long term captial gain since you have held the property for more than one year. The rate is 5% or 15%( some may in 5% to the extent of 15% tax bracket).
