Home sale exclusion calculator

Selling at $520,000 does not mean $520,000 is anywhere near the exclusion. The gain is $320,000, because the house cost $200,000, and it is that gain the cap applies to. A $250,000 cap covers most of it and leaves $70,000.

So the exclusion is far larger than it looks. On a house held long enough for the price to more than double, a $250,000 cap can still cover the whole gain.

Adjusted basis is the purchase price plus buying costs plus capital improvements over the years of ownership. A new roof, an extension, a rewire: each one raises basis and lowers the gain by the same amount, dollar for dollar.

That is the strongest reason to keep receipts on a home for decades. Improvements that were never recorded are basis that cannot be proved, and unproved basis is taxable gain. See capital gains tax for what happens to the part above the cap.

Different situations carry different caps, and joint filers usually have twice the cap of a single filer. The second example uses a $500,000 cap on a $600,000 gain from an $800,000 sale, leaving $100,000 taxable, and the arithmetic is identical.

That is why the number is typed in rather than fixed. Enter the cap that fits the case and the identity handles the rest.

Whatever is left over is a capital gain like any other, taxed at the rate that applies to the holding. The capital gains tax calculator takes $70,000 and a rate and prices it. Eligibility rules about ownership and use are separate from this arithmetic, which starts once eligibility is settled. This is educational material, not financial advice.