{"id":5503,"date":"2025-01-10T04:00:44","date_gmt":"2025-01-10T12:00:44","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=5503"},"modified":"2025-02-27T09:30:27","modified_gmt":"2025-02-27T17:30:27","slug":"how-to-avoid-capital-gains-tax","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/how-to-avoid-capital-gains-tax\/","title":{"rendered":"7 Ways to Avoid Paying Capital Gains Tax on Your Home Sale"},"content":{"rendered":"

If you\u2019ve owned your house for 7-10 years, your overall home appreciation rate may be as high as 50%<\/a>. Even if you\u2019ve only owned your property for 2-3 years, it\u2019s likely you\u2019ve built up some healthy equity.<\/p>\n

But when you try to cash out on your biggest life investment, the IRS can swoop in to steal your thunder. That\u2019s right\u2026 you have to pay taxes when you sell your home (unless you don\u2019t).<\/p>\n\n\n\n\n\n

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How Much Is Your Home Worth Now?<\/h3>\n

As you look ahead and plan your next move, you can get a near-instant real estate house price estimate from HomeLight for free. Our tool analyzes the records of recently sold homes near you, your home’s last sale price, and other market trends to provide a preliminary range of value in under two minutes.<\/p>\n \n

\n Get Estimate<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n\n

The capital gains tax<\/a>, the tax on the sale of a capital investment, could siphon off up to 20% of your profit. In this post, a leading tax analyst and a top-performing real estate agent break down the nitty-gritty of capital gains tax when you sell your home, so you can walk away with more of your home sale proceeds<\/a>.<\/p>\n

Editor\u2019s note: This article is meant for educational purposes and should not be construed as financial or tax advice. HomeLight encourages you to reach out to a professional advisor regarding your own situation.<\/em><\/p>\n

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Capital gains tax on a home sale explained<\/h2>\n

Generally speaking, the capital gains tax is the tax imposed on the sale of a capital investment.<\/p>\n

Nathan Rigney,<\/a> a lead tax analyst at H&R Block, explains that real estate property is a capital asset, so it is subjected to capital gains tax once it\u2019s sold.<\/p>\n

Note that there are two types of capital gains: short-term and long-term. Short-term capital gains are what you pay when you sell the home you\u2019ve owned for a year or less. These are taxed at the same rate as your regular income, so it could be pretty high, depending on your tax bracket.<\/p>\n

Long-term gains, which you earn from the sale of a home held for over a year, are taxed at a lower rate (0%, 15%, or 20%), saving you money. Moreover, Rigney explains, \u201cthere are exclusions that are easy to qualify for if you know about them ahead of time.\u201d This is why holding assets longer and taking advantage of exclusions can mean way less tax stress when it\u2019s time to sell.<\/p>\n

\u201cIf you\u2019re selling your main home and you\u2019ve lived in it and owned it for at least two of the last five years, you can exclude possibly all of the gain,\u201d says Rigney.<\/p>\n

To break it down, this is how he puts it:<\/strong><\/p>\n