How to reduce or avoid tax when selling a home
Money Girl
Macmillan Holdings, LLC
4.6 • 1.8K Ratings
🗓️ 5 June 2026
⏱️ 16 minutes
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Summary
1025. If you’re considering selling a home, you may wonder how it will affect your taxes. Laura answers a listener’s question on this topic and explains how to use a legit, massive tax exclusion that allows many homeowners to skip home sale taxes altogether.
Key takeaways
- Selling an asset, such as a home, for a profit results in capital gains tax, with a rate that depends on your income and how long you owned it.
- The Section 121 exclusion, known as the home sale capital gains tax exclusion, allows eligible single taxpayers to exclude up to $250,000, or joint tax filers up to $500,000 of capital gains on their primary residence.
- Homeowners qualify for the gains exclusion if they owned and lived in the home for at least two years during the five years preceding the sale.
- There are legal exceptions where you qualify for the full or partial gains exclusion even if you sell your home before living in it for two of the previous five years.
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Transcript
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| 0:00.0 | If you're a homeowner who's considering selling your property after significant appreciation, |
| 0:11.3 | you may be worried about how much tax you could owe. That's what a listener named Mara asked me about. |
| 0:18.5 | Mara says, I bought my home many years ago for $300,000 before prices in my neighborhood |
| 0:25.6 | skyrocketed. But now my husband and I want to downsize because our kids are grown and we don't need |
| 0:31.6 | as much space or ongoing maintenance. I want to be prepared for a potentially big tax bill. What could we owe in taxes if we |
| 0:40.7 | sell our home for $1 million or slightly more? Thanks so much for your question, Mara. Seeing your home |
| 0:49.1 | value go up is exciting, but selling a family home is a huge milestone that typically involves many emotions. |
| 0:57.7 | And as you mentioned, the IRS may want a piece of your profit, unless you legally outsmart them. |
| 1:06.4 | This podcast will review a legitimate way to reduce or eliminate taxes when you make a profit on your home sale, whether you're a homeowner or want to be one someday. |
| 1:18.5 | This may be one of the biggest tax breaks you'll ever get, so stay with me. |
| 1:23.8 | Hey, everyone, welcome back to episode 1025 of Money Girl. I'm Laura Adams, an award-winning author, |
| 1:31.1 | financial spokesperson, and money speaker. In the show notes, you can find links to learn more about me |
| 1:37.1 | and how to reach out. So let's talk about what tax you owe on a home sale. You probably know that when you earn money from a job |
| 1:45.9 | or interest on a bank account, you do have to pay ordinary income tax. And for 2026, the |
| 1:52.8 | ordinary brackets range from 10% up to 37% for your federal taxable income. Plus, you may owe additional tax depending on your income and |
| 2:04.8 | home state. However, when you sell certain assets for a profit, you must pay capital gains tax. |
| 2:13.4 | And these assets might include stocks, exchange traded funds, or real estate. |
| 2:19.5 | The capital gains tax rate depends on your income, your tax filing status, and how long you |
| 2:25.5 | own the asset. |
| 2:26.6 | But for 2026, the brackets range from zero to 20%. |
| 2:32.2 | So it's actually a more favorable and can be a lower tax rate than for ordinary |
| 2:37.6 | taxes. For instance, a married couple filing taxes jointly with a taxable income of $98,900 or less |
... |
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