How to Avoid Capital Gains Tax When Selling Real Estate (2023) - 121 Exclusion Explained

In this video, I cover the Section 121 Gain on Sale of Home Exclusion and answer the following questions:
1. How can you avoid paying capital gains tax on the sale of your primary residence?
2. How to properly calculate the gain or loss you would have on your home if you sold?
3. IRS Code Section 121 and how to qualify.
4. What if your gain is over the exclusion amount, what then?
5. How many times can you use the exclusion?
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#capitalgains #section121 #realestate

[@dominiquelee8514]

This video was incredibly helpful and informative, thank you!! You just gained a subscriber!

[@brandiglitz8415]

I just sold my house and was not aware that I could deduct closing costs from the purchase price. So good to know, thank you.

[@naytid]

Great video! You are a natural at teaching

[@NaviMarajCPA]

Thank you! 👍🏼

[@ScarfaceMartinBeats]

Great explanation!

[@glennirwin4710]

Super video!

[@nayangovan9296]

Great video! Really appreciate the knowledge. Are you planning to do any videos regarding 1031 exchanges? Specifically, we are looking to sell a home that is of greater value than the one we are planning to purchase. Thanks!

[@giannismg]

Great video - Thank you for sharing!! are there any federal taxes to consider? I see a comment below referencing to that.

[@eddieg5466]

Good morning Navi, new to the channel, excellent video, subscribed already 😊 I have a question, I know that each state has slightly difference in laws, I was wondering if what you're explaining here, apply to the state of Arizona which is where I live 🤔 Thank you in advance Best regards!! Eddie. ✌

[@robertlorenzo5166]

Thank you so much

[@florencerichaud8639]

Hi! Great video!!! What do you know about FIRPTA? As a non-resident, can it be avoided?

[@shopnpdekhi]

Hi Navi, Thanks for the useful video. Can you please elaborate how job relocation impacts this 121 exclusion?

[@fredandaylinenotsaying3810]

When does the two years begin? 1) when the land is purchased or 2) when the house is built. If the IRS uses when the house was built is it when the purchase contract was signed with the builder or when the certificate of occupancy is issues?

[@STARSFashionArtLove]

Would be nice if they thought us this in school, good job Navi 💖💛💚

[@jeremybly]

Lol, good one. How to manage money will never be taught in school. They want everyone in debt.

[@CatsAreNiceMeow]

Excellent, detailed video! I have a question. If my regular income (single filing) is 37k and I gain over 250k in capital gains. Do I pay capital gains taxes on a house I sold that lived in for four consecutive years? It's a rental. I live in the same house as tenants. Also, I'd be spending most of my gains on a new home. I live in the state of Rhode Island. I messaged my accountant but he has not answered me. I'm not sure @ should sell or not. I've owned the property for decades. Thank you!

[@i.am.navkaur]

Thank you for this video. Very easy to understand. One question remaining is, I have a condo in California and will have greater gains than the $250k. But, if my income is less than a certain amount, can I avoid paying any gains whatsoever? In tax year 2024, what is that amount for a single person?

[@robino.5340]

How does capital gains figure in with an inherited home that's in trust when it's sold? There are 8 siblings all over the age of 62.5 yrs. Old. ? Does the 121 exclusion rule apply individually to each person receiving proceeds from the property sale? If not, how would we avoid paying tax on our share of the sale proceeds?

[@Enriquevandm]

What if the house is under two owners and they sell the house can just one report the whole amount of the sale and then made this exclusion or it needs to be divided into parts, one needs to report half and the other, the other half of how that works?

[@skb2154]

What if we are selling a commercial building that has been our private residence for over 10 years? We did have it zoned as residential a few years ago with the county property assesors office. What would be our capital gains scenario? Thank you :0)

[@CeciliaMarieAngela]

Do you have any videos showing how to take the carryover schedule E rental losses against the capital gains of the sale of the rental property? My software continued to show an unallowed loss.

[@tonybasa7491]

Tax liability on here applies to state AND FEDERAL?💰❓

[@lisa29371]

Hi, what happens if I lived in the property for three years before I rented out but it was rented for 4 years out of the five can I qualify for a partial exclusion? Also is it true that if your regular income as a self-employed person is under 40,000 but my capital gain is 200k I don't pay any capital gain taxes at all? Because my earned income is under 40k then there's no capital gain tax?

[@Jimbojoebob]

Great video. We have owned our home for 25 years with 3 renovations done many years ago. Is there any present value adjustment that can be used for improvements done years ago?

[@chonkychookie6949]

thats a really good question

[@gwenwelch7593]

When you say live there 2 years, does that mean you must change resident legally by changing where you pay taxes, where you vote, etc, as in the case of a second property in another state?

[@jollymon6672]

What if the property being sold is land and you did not live there. How does that change the calculations?

[@rubengonzalez-qk6bx]

Can I use a 1031 exchange for another property if my capital gains are over my exclusion amount ? Example I’m filling single and I have over $350k in capital gains. I like to use $100 as down payment on another property.

[@JuanLuna-kc6fc]

Great explanation in mi opinion! I have a question I lived in my primary residence for 14 years. I bought 2nd house and I’m been living in it for 10 months now. I’m planning on selling my first home so I still qualify for the tax exclusion?

[@sherryneve6108]

I need someone to help me understand inheritance home. Is tgere a CPA that can help with buying or selling my sibling out.. the home eas paid off in 2001 (owned since 1972) i want the taxes split between us, when it comes to the sale if we sell out our portion. Im not sure how to calculate or do this so that i dont lose money in the split.

[@callmeishmaelk767]

Do you have to buy another house with the proceeds from a sale to avoid paying tax or can you just stuff the money in the bank?

[@sarahmyers102]

Navi, Can you please elaborate on how CG works for someone who is widowed, AND something you didn't mention, age as a factor? Is there any exclusion for someone over 80?

[@reniemuratore8155]

I would love to hear about this as well

[@loreleihappel9901]

I was just informed that if I tear down down my existing home (which I have owned and still live in for 30 years) and decided to rebuild a new home on the same lot, so I can resell and move to another state, that I do not qualify for the capital gains exclusion (Gates VS IRS), due to not living in the new home. Is this correct? If so will I be taxed long term capital gains or Short term Capital Gains?

[@lavellnutrition]

So if my income is less than $29K, am I correct to assume I pay No Capitol gains taxes on the sale of my home as a single person?

[@careymeaway2024]

'living there'... do they check if you are physically inside the home? or can it just be your main mailing address?

[@TheK9Shepherd]

Are there exclusions from capital gains for medical reasons? My wife and I live with her mother who has dementia. My wife and I are moving but we have to bring her to take care of her. Is there an exemption that she can get on her capital gains when the mother sells the house?

[@craigaverdung7805]

Question please…. I understand that you must live in your home for 2 years as your primary residence. Must you have owned that home for 5 years to qualify for the exclusion? I bought my home exactly 2 years ago and has been my primary residence since July of 2022. Do I qualify? Or must I own the home for 5 years?

[@JtotheRizzo]

My parents bought a house 30yrs ago for $330K. My sister and I was deeded our parents' house about 7 years ago and we now own it 50/50%. This was done before we understood the tax basis and capital gains tax dilemma. The house is now worth about $1M. If my sister and I were to form an LLC (S-corp election) where my sister and I are 50/50 owners of the LLC and we sell the property to the LLC for, let's say, $830K (i.e. $500K capital gains). If she takes the $250K cap gains exclusion on her tax returns and I do the same, does this work for us to still own the property and be able to pay $0 cap gain tax as per Section 121?

[@georgehirvela7435]

I understand that I can defer cap gain tax if I buy a new home with the money from selling my current home, but what if I want to build a home?

[@wandaalger6845]

are capital gains and Federal Capital Gains the same?

[@trenabry8808]

Is 2 years 6months + of 2 years or 24 months

[@kulluminati777]

What if i sold the house for LESS then ehat i bought it for? Am i paying any taxes then? I would think not

[@lyad3618]

What if the property is a rental?

[@jesusvela2624]

Question, I bought my house 2 years ago and lived there since. If I sell it, can I still take advantage of the 121 exclusion if I haven't owned the house for over 5 years? thank you

[@seanartpsyc]

Same question!! Really would love to know as you state that if you have lived in the house full time for the past two years of 5 years....what does 2 out of 5 years mean exactly? Let's say I owned the house for four years and lived there full time up till the sale of the house, do I still qualify? Thanks!

[@ik496]

Does a divorce count as “unforeseeable event”?

[@codyd.4711]

So how do they calculate what tax bracket you are in? Is it just how much you make a year at your job or do they include the amount that you made on the sale of the house in that? So say you make 50,000 a year you’d be in the 0% tax bracket for LTCG but if you made 600,000 on the sale of your house is your tax bracket now 650,000 so you’d be in the 20% tax bracket ??

[@dcone54321]

Your tax bracket is based on your earned income. Selling ur house for a profit is not included in figuring which tax bracket you fall in... Any profit on primary residence home sale is considered capital gains. Google an article from SmartAsset published 5/31/24 for a great explanation w some examples. Here is some of it below "In 2024, there are three long-term capital gains tax brackets: 0% - Up to $47,025 Single/$94,050 Joint 15% - Between $47,026 - $518,900 Single/Between $94,051 - $583,750 Joint 20% - Above $518,900 Single/$583,750 Joint"

[@eatmeatnmove]

My grandpa sold me his house in 2014 for $1. He purchased the house in 1965 for $24,000. But now the house is worth just under 1 million. I’m in contract. My lawyer will be holding capital gains tax in escrow. Wondering if I am just to go with her calculations? I could probably ask her this… But I don’t want to offend anyone, and I just want to make sure that I am paying the least amount of capital gains I can. Last question, I took out a home equity line of credit and completely renovated. The basement totaling just over $100,000. That’s not a mortgage… But a loan, can I deduct that since I improved the property?

[@meerkatmanor2473]

You add improvements to your basis.

[@michaelliscano4572]

If I live in my residence 13 months then sell, rent for a year, then buy again and live there 1 year or longer, do I meet the exclusion?

[@brianprelgo4553]

Question: Me and my wife are selling are home and relocating across the country and getting a new job.We have gained some equity by fixing it up, right now it would be about 22 months just short of the 2 years, do you know if we would still have to pay taxes?

[@sosalty701]

He said it in the video

[@deborahsavageshaffer6846]

Does your adjusted gross income effect the percentage of your capital gains tax?

[@Csharpflat5]

Yes it can put you in a higher bracket

[@deborahsavageshaffer6846]

@@Csharpflat5 well then if you have $400,000.00 in Capital Gains and your AGI is below the poverty level what would your Capital Gains Tax be? 0%

[@johnpalumbo8567]

if it's not your primary home and it was used as a weekend get away home.. then what?

[@67beachlover]

I’m selling my 2nd home a mobile in Florida.. I paid $35,000 and 5 years later sold for $100,000 my accountant said I have to pay $30,-40,000! And I had mold 2 yrs ago and put in $47,000 of my own money.. does this sound right??

[@10oner]

With a democrat in office yes that sounds right

[@nat.serrano]

I bought a house in 2016, lived for 6 months, then relocated for work to high COLA, so I just rented rooms and keep my house, my bank never changed, my ph number never changed, I rented to travelling nurses when I wasn’t there, During covid I lived there so I totalled 2 years. Then I sold for less than 500k. Am I qualified to avoid paying capital gain taxes?

[@Brightly747]

My spouse left me our CA house as part of a divorce settlement. We had lived in the house for ten years. If I sold the house, would I qualify for the $500K exemption?

[@sonhuynh8222]

DON’T FORGET THIS VERY IMPORTANT FACT ….. You will owe $0 capital gains tax if you make less than $44k single and &89k married 👍🏼

[@djgriffin7393]

Didn't know that, thank you.

[@marinascott-mw9ut]

I just sold land I inherited for 170k. I am not working and single. I have no income so does that I do not have to pay capital gains?

[@shawn7283]

Hello. I live in Arizona and about 2 years ago I turned my condo it into a rental property and its being rented ever since. Before it was rented, I lived in it for 2 years. I plan on selling this place next month. Do I still qualify for the 2 out of 5 rule although the property has been being rented for the last 2 years?

[@lisa29371]

Hello, I came across the same situation as you are and the answer is yes you are still qualified for the exclusion as long as you live there 24 months out of the five years, if you wait another year you wouldn't qualify so just make sure you sell your property within those five years where you lived there 2 years out of the 5

[@shawn7283]

@@lisa29371 Lisa! Thank you so much! I was about to pay a CPA 500$ an hour for this information! Virtual HUGG!

[@riasat001]

is this USA or Canada?

[@nicolereadstarot]

We have a loan for $114k but our home is bow worth almost $300k. I feel like we need to get a new home because we dont have enough bedrooms now. Is there a way to just like... Switch our mortgage to a new property and keep our 3% interest? My husband is worried we will have to get a brand new mortgage with a way higher interest rate. Please help. I am desperate here.

[@sofiazapata5556]

How to qualify for the use test if the couple were leaving at that house but they weren't married but they married just before they sold their home. Thanks so much

[@markoghattes3156]

If I buy a 2nd house, does it waive the exclusion on the 1st house?

[@NaviMarajCPA]

No - as long as you pass the tests.

[@InvestersEdge-lm6zl]

Does selling your home influence your total income when trying to stay under the taxed dividend income income limits? So another words will ghe sale push you over the bracket to where you end up paying taxs on your qualified dividends that you otherwise would have qualified for if you didn’t sell the home!

[@reniemuratore8155]

How about if the son is selling mom's house. She is 90 and living with son. How much capital gains? Mom is a widow.

[@JRspeaking]

How do you prove that you've lived there the 24 months?

[@victorcervantes6300]

You didn’t say what it would be if it is above 500,000. Like here in california. What if you have above 500,000 in your sale of your homestead.

[@AnasKhan-uw7vf]

what if property is on mortgage ??

[@dcone54321]

When u sell your house, any balance of what is still owed on your mortgage is deducted first, thereby reducing your "profit".

[@zeekflash6924]

What is your single , live in home 10 yrs ,home has loan 300k heloc 100k , sell house for 700k , what is the realized profit 300k ? Taxable capital gain ? 300k -250k exempt , so 50k taxable gain Correct me if I’m wrong

[@stuartwood5571]

Married couples have a $500,000 capital gains exemption on the sale of their home in CA.

[@ak6143]

Same in indiana if youve lived there 5yrs

[@andrewwyllie5397]

Can the taxes you paid throughout the time you owned the property included as Adjusted basis, or that's the reason you have the section 121 exclusion?

[@narasimhavempaty3]

Very basic information presented. I was looking for how the CG tax actually calculated but he simply assumed 15% and multiplied it by the gain. In reality its not this simple, I dont know how to do it but part of your CG is taxed at 0 or 15 or 20 and then there is net investment income tax.

[@ll-qq9qr]

What if you become disabled and yiu have to srll your house?

[@juliafisher5844]

This is US 🇺🇸

[@japanhousesuitescda4729]

How to figure out 😂Boot tax

[@benjamins8082]

Is this in 🇨🇦 or 🇺🇸?

[@kulluminati777]

America.