SELLING YOUR HOME at a profit represents one of the best tax deals around. Thanks to laws passed a few years ago, you can reap up to $250,000 (if single) or $500,000 (if married) in cool, tax-free gains when you sell.
Sounds great, right? For a lot of home sellers, it is. Unfortunately, though, many homeowners discover they don't fully qualify for the exclusion — either because they aren't eligible or because they have substantial gains locked into the value of their home, pushing them over the threshold and into tax territory. (For the nitty-gritty details, click here.)
This calculator will help you figure out what your tax break should be. First, it'll help you determine if you're eligible (you must have lived in your home for at least two of the past five years, with some exceptions). Then it'll help you calculate the tax basis for your home.
That's the tricky part. Under the old rules you could roll over your gains on the sale of home tax-free if you bought a home of greater value. Under current rules, the value of your new home doesn't matter for tax purposes. But any accrued gains from previous rollovers (and many of us did it more than once), matter a lot since they're subtracted from the cost basis of your present home. Suddenly the $500,000 tax-free gain limit doesn't sound like all that much, does it?