Capital Gains When Selling Your Jacksonville Home

Many Jacksonville homeowners have seen their equity grow a lot over the past several years, especially longtime owners in established neighborhoods. So one of the first questions we hear from sellers is, "Will I owe tax on this?"

For most people selling their main home, the answer is no, or less than they fear. Here's how the federal rules work, so you can have a productive conversation with your CPA. This isn't tax advice, and your situation may have details that change the answer.

The home sale exclusion

Under IRS rules for a main home, you can generally exclude:

• up to $250,000 of gain if you file single; or
• up to $500,000 if you're married filing jointly.

To qualify, you generally must pass two tests during the five years before the sale:

• Ownership: you owned the home for at least 24 months.
• Use: you lived in it as your main home for at least 24 months. The months don't have to be in a row.

For the $500,000 joint exclusion, only one spouse needs to meet the ownership test, but both must meet the use test. And you generally can't have excluded gain on another home sale in the prior two years.

How to estimate your gain

Gain isn't the sale price minus the purchase price. It's closer to this:

1. Amount realized: the sale price minus selling costs, such as commissions, title fees and documentary stamps the seller pays.
2. Adjusted basis: what you paid, plus certain purchase closing costs, plus the cost of improvements over the years.
3. Gain = amount realized minus adjusted basis.

Then subtract your exclusion. If anything is left, it's generally taxed as a long-term capital gain if you owned the home more than a year.

What counts as an improvement?

Improvements add value, extend the home's life or adapt it to new uses. Think of a new roof, an addition, a remodeled kitchen, a pool, impact windows or a new HVAC system. Routine repairs, like patching drywall or fixing a leak, generally don't count. Keep your receipts. For longtime owners, documented improvements can make a real difference.

Situations that change the math

Talk with your CPA before listing if any of these apply:

• You haven't lived there two years. A partial exclusion may be available if you're moving for a qualifying job change, health reasons or certain unforeseen circumstances.
• You used part of the home for business or as a rental. Depreciation you claimed, or could have claimed, generally can't be excluded.
• You're divorcing. IRS rules let a spouse count time while the other spouse lives in the home under a divorce instrument. See selling a house during a divorce in Florida.
• You inherited the home. Your basis is generally the value at the date of death, not what the original owner paid. See selling an inherited home in Jacksonville.
• You're a surviving spouse. If you sell within two years of your spouse's death and meet the other conditions, you may still qualify for the $500,000 limit.
• You recently moved from another state. Florida doesn't have a state personal income tax, but your former state may have rules about when residency ended.

A seller's checklist

Before we list, it helps to gather:

• your closing statement from the purchase;
• receipts or permits for major improvements;
• the dates you lived in the home; and
• any records of home office or rental use.

We'll provide a market analysis with a realistic sale price and estimated selling costs, so your CPA can run the numbers before you commit to a list price.

Thinking about selling a home you've owned for years? Let's start with what it's worth today.