Capital Gains on Home Sale
Estimate the tax on a home sale
Estimated net proceeds (after federal tax)
$651,000
Your gain of $198,000 is fully covered by the Section 121 exclusion ($500,000 for married filing jointly). No federal cap-gains tax estimated. State tax, NIIT, and AMT aren’t modeled here.
Sale price
$700,000
less 7% selling costs
Adjusted basis
$453,000
$420,000 + $8,000 closing + $25,000 improvements
Total gain
$198,000
$651,000 − $453,000
Section 121 exemption
$198,000
MFJ
Taxable LTCG slice
$0
fully excluded
Estimated federal tax
$0
no federal tax estimated
Section 121 quick reference
The basics: if you owned and used the home as your primary residence for at least 2 of the last 5 years before sale, you can exclude up to $250k single / $500k MFJ of capital gains from federal tax.
The 2-of-5 rule: the 2 years don't need to be consecutive. The "5 years" is measured backward from the date of sale.
Once every 2 years: you can use the exclusion repeatedly, but no more than once every 2 years.
Partial exclusion: if you sell early due to job change, health, or unforeseen circumstances, you may qualify for a prorated exclusion.
Converted rentals: if you rented the home out before selling, the "non-qualified use" rules pro-rate the exclusion. Convert and you typically have ~3 years of "convertibility" before losing the exclusion entirely. See Sell vs Rent-Out for that case.
This calc covers the standard primary-residence sale. Investment property sales, depreciation recapture, 1031 exchanges, and partial-year occupancy all add complexity, so consult a CPA for those scenarios. State tax not modeled.