Tax Rules Every Home Seller Should Know

By John Wesley Walker II

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Are you wondering if you’ll owe taxes on the profit from selling your property? It’s one of the most common questions I get, and the answer isn’t always simple. Whether you’re selling a home you’ve lived in, an investment property, or an inherited house, tax rules can vary. Today, I’ll show you the three rules you should know when it comes to property taxes:

Have you lived in the home? If you’ve lived in the property for at least 2 out of the last 5 years, you probably won’t owe taxes on the profit. This is called the primary residence exclusion, and it’s a big benefit for homeowners. For example, if you make $20,000 in profit from the sale, you can keep that money tax-free. The key is that you’ve used the property as your home for two years within the last five years.

Is it an investment property? If the property is a rental, a flip, or an investment that you’ve never lived in, the rules are different. You’ll likely owe taxes on the profit when you sell. These are usually referred to as capital gains taxes, and the rate can depend on how long you’ve owned the property. Selling an investment property is a great way to cash in, but it’s important to plan for the taxes you might owe.

Did you inherit the property? In most cases, you won’t owe taxes on the sale of inherited properties. Tax laws around inherited property are different from those for regular sales. If you receive a home through a will or succession, the stepped-up basis tax rule often applies, which means you can sell the home without paying taxes on the profit.

While I can guide you through the real estate side of things, tax rules are tricky. It’s always a good idea to consult with a CPA or accountant. They’ll help you understand exactly what applies to your situation and how to avoid surprises. If you have real estate questions or need help finding a local CPA, you can call or text me at (318) 794-6769. I can connect you with trusted professionals who specialize in real estate taxes. My goal is to make selling your property as smooth and stress-free as possible.