If you sell a home making a profit of 500k in CA, you are 55, do you pay capital gains, or 1 time exempt?
Answer:
The is no more "one-time exemption."
The sale of a principal residence law changed several years ago (more than 10 yrs.)
Anyone selling a house in the US can avoid paying taxes on up to $250K per person ($500K / married couple) on the capital gains of their house, but only if they have lived in it for 24 months out the past 5 years. There is no age limit anymore. But you will need to pay taxes on that portion of the capital gains which exceed the $250/500K limit.
See your tax adviser for the details. You don't want to make a costly mistake on this tax event.
Capital gains = sales price less cost basis. Basis can be somewhat tricky, if you have made major improvements and/or taken depreciation, say on a home office, then those have to be properly accounted for.
Is it a rental or your primary home? I believe it matters.
You can't take the one time exemption.
I believe the max. is $250,000.00 per person, so if you file a joint return, and the home was in two names, I believe the max. allowed for exemption is half a mil.
Verify this by going to IRS.gov
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