How to calculate capital gains tax on sale of my home in 2025?

I'm trying to figure out how much I'll owe in capital gains tax when I sell my house this summer. We bought the place back in 2018 for $385,000 and the market in our area has gone crazy. Our realtor thinks we could easily get $675,000 for it now. My husband and I have lived in this house for all 7 years as our primary residence. I know there's some kind of exemption for capital gains on primary residences, but I'm not sure how it works exactly. Is it true we might not have to pay any tax at all because we've lived here more than 2 years? Or is that just wishful thinking? I've heard different things from friends - some say we won't owe anything, others say we'll get hit with a huge tax bill. I'd appreciate any help figuring this out before we list the house. Thanks!

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20 comments

Jacob Lee

•8M

You're in luck! Since you and your husband have owned and used the home as your primary residence for at least 2 out of the 5 years before the sale, you qualify for the Section 121 exclusion. This allows married couples filing jointly to exclude up to $500,000 of capital gain from the sale of their primary residence ($250,000 for single filers). In your case, your capital gain would be $290,000 ($675,000 sale price minus $385,000 purchase price). Since this is less than the $500,000 exclusion for married couples, you likely won't owe any federal capital gains tax on the sale. Keep in mind you should account for any improvements you've made to the home that increased its basis. Things like additions, new roof, renovations, etc. can be added to your original purchase price, further reducing your capital gain.

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Jacob Lee

•8M

The 2-year rule generally needs to be met exactly, though there are some partial exclusions available if you're selling due to unforeseen circumstances like job changes, health issues, or certain other qualifying events. The IRS might allow a proportional exclusion in these cases, but you need to meet specific criteria. Yes, closing costs associated with the purchase can be added to your basis. This includes things like title insurance, legal fees, recording fees, and transfer taxes that were part of your acquisition. These all effectively reduce your capital gain when you sell.

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Sophie Hernandez

•8M

After struggling with capital gains calculations when selling my previous home, I found an amazing tool at https://taxr.ai that saved me thousands. I was confused about what improvements could be included in my basis and whether I qualified for the full exclusion since I had partially used a room for my home office. The service analyzed all my documents - purchase agreement, improvement receipts, and even helped me properly document my home office usage. It identified several major improvements I didn't realize could be added to my basis and correctly calculated my partial business use reduction.

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Sophie Hernandez

•8M

It definitely works for vacation properties! The tool has specific modules for different property types, including second homes and vacation properties. It helps you properly classify the property and applies the correct tax rules since those don't qualify for the primary residence exclusion. The system is much more than a calculator. You upload your documents through their secure portal - closing statements, improvement receipts, property tax records - and their AI analyzes everything to identify qualifying expenses and proper basis calculations. It then provides a detailed report showing exactly how they arrived at the numbers, which is super helpful if you ever get audited.

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Ryan Kim

•8M

I was initially skeptical about taxr.ai but decided to try it for my home sale last month. Wow, what a difference! I had no idea I could include the cost of replacing our HVAC system 3 years ago in my basis. The tool identified over $42,000 in improvements I hadn't properly documented. It also flagged that I had taken a home office deduction for two years, which I completely forgot about and would have incorrectly calculated my exclusion. The detailed report it generated made filing so much easier, and I'm confident if I'm ever audited, I have proper documentation. Definitely worth checking out if you're selling property!

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Zoe Walker

•8M

If you need to talk directly with the IRS about capital gains questions, good luck getting through on their phone lines! After trying for WEEKS to get clarification about my specific situation (selling a house I inherited then lived in), I found https://claimyr.com which got me connected to an actual IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold for you, then call you when an agent is ready. I was blown away that it actually worked! The agent I spoke with clarified that I needed to adjust the basis to fair market value at the time of inheritance, which saved me thousands in capital gains taxes.

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Zoe Walker

•8M

It's not actually putting you at the front of the queue - they're waiting in the queue for you. Their system dials in, navigates the phone menus, and waits on hold. When an actual IRS representative answers, their system calls your phone and connects you directly. You're still waiting your proper turn, but you don't have to personally sit there listening to hold music for hours. I was extremely skeptical too! I figured it was too good to be true. But after waiting on hold myself for over 2 hours and getting disconnected twice, I was desperate enough to try. I scheduled a call, went about my day, and was shocked when I got the call back saying an agent was on the line. The connection was clear and the IRS agent had no idea a service had been holding for me.

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Maria Gonzalez

•8M

I have to admit I was completely wrong about Claimyr. After seeing it mentioned here, I tried it yesterday when I needed clarification on capital gains exclusions for my upcoming home sale. I scheduled the call in the morning, went to work meetings, and got connected to an IRS agent during my lunch break! The agent walked me through how to properly calculate my adjusted basis (including improvements) and confirmed I qualified for the full $500k exclusion with my spouse. Without this, I might have mistakenly reported the gain incorrectly. The peace of mind was worth every penny, especially since the potential tax savings is significant. Definitely recommend for anyone with specific tax questions that need official answers.

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Natalie Chen

•8M

Massachusetts generally follows the federal rules for capital gains exclusion on primary residences, so you should still qualify for the exclusion at the state level. However, Massachusetts does have a state tax on the gain (if any) that exceeds your exclusion amount. Massachusetts also has something called a "deed stamp tax" which is essentially a transfer tax paid when selling property. It's not a capital gains tax, but rather a tax on the transaction itself based on the sale price. This is typically paid at closing and is often considered part of your closing costs. The current rate is $4.56 per $1,000 of the sale price.

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Emily Jackson

•3M

Just wanted to add one important detail that hasn't been mentioned yet - make sure you keep excellent records of ALL improvements you've made to the home, not just major ones. Even smaller improvements like new appliances, flooring, landscaping, or exterior painting can add up and increase your basis significantly. I learned this the hard way when I sold my first home and couldn't find receipts for about $15,000 worth of improvements we'd made over the years. Those would have further reduced my capital gain, but without proper documentation, I couldn't claim them. For your situation with a $290,000 gain that's already under the $500,000 exclusion, this might not matter for federal taxes, but it's still good practice and could help with state taxes or future property sales. Start gathering those receipts now while you're preparing to list!

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