What are the rules for avoiding capital gains taxes on the sale of your home

You can avoid capital gains on the sale of your home as long as you have lived there two of the last five years.  A single person can avoid taxes on up to $250,000 profit and a married couple can avoid gains on up to $500,000 of profit.  You can use this exemption as many times as you want, but no more often than every two years.

Caesar: I have a quick question regarding real estate. I lived in Houston about 13 years and I moved to Florida about six, seven years ago. When we moved, we rented the house that I have in Houston. My renters are about to leave and I need to figure out if I should put it back on lease or if I should sell it.

I’ve heard two stories. One, that if I sell it I would be taxed on the profit of the house, and the other story is that if I sell it, because I lived in that house more than five years, I wouldn’t be taxed on the profit.

Attorney Tom Olsen: Caesar.

Caesar: You know what that is?

Attorney Tom Olsen: I do. Caesar, you can avoid capital gains taxes on that Houston house as long as you’ve lived there two of the last five years. When did you move out of there, Caesar?

Caesar: Moved in 2009 from Houston.

Attorney Tom Olsen: You’re way too late. You have not lived there two of the last five years. Therefore, you’re going to pay ordinary long-term capital gains taxes on the sale of that Houston house, Caesar. As far as I know, that’s 15%.

Caesar: Okay, I appreciate the call. Thank you.