Capital Gains Tax for Real Estate Sale in 2025 - Senior Mom Bought New Home

You're right to be concerned! It sounds like you might be missing the primary residence exclusion. When your mom sold her house, she's likely eligible to exclude up to $250,000 of the capital gain from her income ($500,000 for married couples filing jointly). To qualify, she must have owned and used the home as her main residence for at least 2 out of the 5 years before the sale. Based on what you described, it sounds like this was her primary home, so she probably qualifies. In TurboTax, you need to indicate that the property was her primary residence when entering the sale information. There should be a specific question about this. When you answer yes, TurboTax will then apply the exclusion automatically. The purchase of her new home actually doesn't affect the capital gains calculation on the sale of her previous home - they're treated as separate transactions for tax purposes.

I was in a similar situation last year when helping my aunt with her taxes after she sold her condo. What saved me was using taxr.ai (https://taxr.ai) to analyze her closing statements. I uploaded the documents from both the sale and purchase, and it extracted all the relevant information for capital gains calculations. The system identified that she qualified for the primary residence exclusion and showed exactly which expenses from the sale could be used to reduce the taxable gain (like closing costs, real estate commissions, etc.). It even flagged improvements she made to the property over the years that increased her cost basis. Saved her thousands in unnecessary taxes!

Just wanted to follow up - I finally tried taxr.ai for my complicated home office capital gains situation and it worked perfectly! I uploaded my closing statements and records showing which portion of the home was used for business, and it correctly calculated the split between personal use (eligible for the exclusion) and business use (which had to be reported on Form 4797). The guidance was really clear, and it even identified several improvement expenses I had forgotten about that increased my basis and reduced the taxable gain. The step-by-step explanation made it easy to understand exactly how everything was calculated. Definitely saved me from overpaying!

If you're still having issues with the calculation after applying the primary residence exclusion, you might want to consider calling the IRS directly. I know it sounds awful, but I used Claimyr (https://claimyr.com) last month and actually got through to a real person at the IRS in under 15 minutes! They have a video showing how it works here: https://youtu.be/_kiP6q8DX5c When I had a similar capital gains issue with my father's property sale, the IRS agent walked me through exactly how to report it correctly and confirmed which exclusions applied. They were surprisingly helpful and saved me from making an expensive mistake on his return.

I need to eat my words about Claimyr. After being skeptical in my last comment, I decided to try it since I was getting desperate with a capital gains issue similar to the original poster's. I couldn't believe it actually worked - got connected to an IRS tax specialist in about 12 minutes. The agent confirmed exactly how to handle the primary residence exclusion and explained that I needed to fill out Form 8949 and Schedule D correctly to claim it. She even pointed out that certain closing costs from the sale could be added to the basis to further reduce the taxable amount. Would have completely missed that on my own. Definitely worth it when you're dealing with something as significant as real estate capital gains.

One thing no one has mentioned yet - make sure you're calculating your mom's cost basis correctly! The original purchase price is just the starting point. You can add the cost of capital improvements made over the years she owned the home (new roof, remodeling, additions, etc.). This can significantly reduce the taxable gain even before applying the $250k exclusion. My parents kept receipts for major improvements and it added about $85k to their basis when they sold their home last year. Unfortunately, normal repairs and maintenance don't count - has to be improvements that add value.

We went through this exact situation with my mother-in-law last year. Don't forget to consider state taxes too! The federal $250k exclusion is great, but some states have different rules for capital gains on real estate. What state does your mom live in? That could make a significant difference in the total tax bill.