You have probably heard the phrase, “it is ten-times harder to hold onto wealth than it is to create it.” Fortunately for homeowners, the Internal Revenue Code provides homeowners with a tremendous tax break designed to help homeowners hold onto the wealth generated from the sale of their primary residence. This is great news for Austinites looking to sell in Austin’s hot real estate market.
Specifically, Section 121 of the Internal Revenue Code provides that an individual can exclude up to $250,000 (if you are not married) and $500,000 (if you are married) of capital gain upon the sale of their primary residence. For example, if a married couple purchased their primary residence for $200,000 and later sold it for $600,000, (realizing a $400,000 gain) the entire amount of the $400,000 gain would be excluded from capital gains taxes. However, in order to help make sure you qualify for this tax break, remember the following:
1) This tax break only applies to a person’s primary residence; and
2) The property must be owned and utilized as a primary residence for at least two of the last five years before selling the home.