Do I have to pay tax on capital gains on the sale of my home?
Allan Madan, CA
When a principal residence is sold, the gain is not taxable if it has been the person’s principal residence for the whole time it has been owned. There is a principal residence exemption that eliminates the gain. Also, if the property was your principal residence the whole time it was owned you do not need to report the sale.
If your home was not your principal residence for the whole time that you owned it, you will need to report the capital gain net of the principal residence exemption.
THE PRINCIPAL RESIDENCE EXEMPTION CALCULATION IS:
(# of years home is principal residence + 1) x capital gain
# of years home is owned
The extra year in the formula means that when a person moves, the old property and the new property will be treated as a principal residence in the year of the move.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.