Dear TaxGuru,

Do I have to pay taxes on the sale of my principal residence? I just sold my house for a big profit, but decided not to reinvest in another home.

Dear Adam,

The IRS allows the gain from sale of the principal residence, in general, this is a tax-free event under certain prescribed circumstances.

In general, the rules exempting the capital gains tax are as follows;

1. The taxpayer should have maintained a continuous residence of 2 out of the last 5
years.
2. The exemption from capital gain is $500,000 for a jointly filed income tax return.
3. This is a one time aggregate allow of $500,000 and can only be used once in the
lifetime.
4. If the gain exceeds $500,000 and the taxpayer does not repurchase another home, then
the gain in excess of $500,000 is subject to capital gains tax.

Regards

Tax Guru