Capital Gains Tax Exclusions - Less Taxes To Pay!

Less Tax - More Profit!

August 2, 2004
Bogdan Voicu

Capital Gains Tax Exclusions are one of the most important elements of the capital gains tax laws. It may save you a lot of money when it comes to tax payments.

The most important Capital Gains Tax Exclusion is probably the primary residence exclusion. It may save you taxes for up to $500,000 (for married couples filing jointly) or $250,000 if you file as a single person. There is one condition, though: the house you sell should have been primary residence for two of the last five years. This gets even better: you can repeat this every two years. Just remember to fill for a primary residence every two years.

You decided to sell your house. It may be the house that your parents lived in, or even your grandparents. In this case, you should really have to consider filing for primary residence exclusion. Why is that? Well, because the difference between the selling price and the initial buying price is probably huge. Real estate prices rocket in some areas of the country. This happens during years, months. Imagine the difference existing if these moments take place in a time frame of tens of years.

So, why pay more tax than the one you should? You may be entitled to an exclusion from the capital gains tax for at least $250,000 , as already mentioned.

Another change in the 1993 Taxpayer Relief Act is that if you own a home based business, you can be excluded from the capital gains tax for the part of the house that is used for the business. Before that, the exclusion was only for the part of the house that was used for living. This is good news for the increasing home-based business owners.