House capital gain tax

Some time ago you wrote that a person 55 years or older would be exempt from have to pay capital gains taxes? You may be confused between the special exemption from capital-gain taxes applicable to house sales and capital-gains taxes in general. Only the capital gain from the sale of a personal residence by a person 55 or older is exempt up to $100,000. No other capital gains, on the sale of securities, for example, are eligible.

Further, the person must have lived in the house for three of the last five years prior to the sale, and the sale must not have been completed prior to the person's 55th birthday, not simply the year in which the person attained 55.

If you were to sell a house for $100,000 and it cost $25,000 years earlier, the capital gain would be $75,000. All of that gain would be exempt regardless of whether you bought another house or if you bought another house costing far less.However, the exemption may be used only once in a lifetime. If you use the exemption to avoid paying tax on the $75,000 gain in this example, you would lose the remaining $25,000 available exemption forever; it may not be carried over to another later house sale.

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