Hello and

welcome to Moneygirls quick and dirty tips for a richer life.

Today's topic, how to sell your house tax free.

If you're a homeowner or plan to be one someday, this episode is for you.

There is a significant tax benefit for homeowners that's really important to know about.

If you've owned and lived in your house for two of the previous five years, there's a gift for

you in the federal tax code. And here it is. The IRS allows a capital gains

exclusion of up to $500,000 from the sale of your house if you're married and

filed jointly. If you're single, the exclusion is up to 250,000.

And if you're not married but co-own and cohabitate

your house with someone else, you may each exclude

up to 250,000 dollars from the sale of the home.

This means that so long as the profit when you sell is less than these amounts

you pay no capital gains tax. It's a great tax break.

It hasn't always been this way.

Before the Taxpayer Relief Act of 1997,

you could avoid paying tax on the gain from selling your home if you use the money to buy a

priceier house within the next two years.

You were also allowed a one-time exclusion of up to $125,000 if you were age 55 and older. These rules are no longer

the case today. These days you can sell your home, pay no tax on the gain, and do whatever you want with a profit.

Let's say, for example, you're single and bought your own townhouse five years ago for

$200,000 and put 10% or $20,000 down.

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