Made a profit selling your home? Here’s how to avoid a tax bomb this filing season
If you recently made a profit selling your home, it may come with a costly surprise this filing season: capital gains taxes on your windfall.
In 2021, the average U.S. home seller scored a profit of $94,092, up 71% from $55,000 two years ago, according to ATTOM, a nationwide property database.
While many sellers’ profits fall under the capital gains thresholds for primary homes, others may get hit with an unexpected bill, particularly long-time property owners, experts say. Home sales profits are considered capital gains, levied at federal rates of 0%, 15% or 20% in 2021, depending on taxable income.
The IRS offers a write-off for homeowners, allowing single filers to exclude up to $250,000 of profits and married couples filing together can subtract up to $500,000.
But these thresholds haven’t changed since 1997, and median home sales prices have more than doubled over the past two decades, affecting many long-term homeowners.
