Home Sale Exclusion (Section 121) Calculator

How to do it

1. 1
   Enter the sale

   Type the sale price and your selling costs.

2. 2
   Enter your cost

   Add what you paid, including purchase costs, and the improvements.

3. 3
   Choose your filing status

   Single or joint decides the full exclusion limit.

4. 4
   Enter the months

   Put the months you owned and lived in the home in the last five years.

5. 5
   Read the tax

   See the gain, the exclusion, the taxable part and an estimated tax at the rate you choose.

About this tool

When you sell your main home, up to $250,000 of gain ($500,000 for married couples filing jointly) can be excluded from tax if you owned and lived in the home for at least two of the five years before the sale. This calculator takes the sale price, selling costs, purchase price and improvements, calculates the gain, applies the exclusion, shows the taxable gain and an estimated tax at the rate you choose, and gives a reduced exclusion if you lived there less than two years.

Who this is for Homeowners thinking about selling, people who moved for work before reaching two years, and families comparing the net proceeds of selling now or later. It helps with the question whether a sale will create a tax bill at all.

How the gain is calculated Start with the sale price and subtract the selling costs, such as commissions and closing costs, to get the amount realized. Your adjusted basis is what you paid, including purchase costs, plus the cost of improvements that add value or extend life (not repairs). The gain is the amount realized minus the adjusted basis.

The exclusion and the two tests The exclusion is $250,000 for single filers and $500,000 for joint filers where both spouses meet the use test. You must have owned the home for 2 of the last 5 years and used it as your main home for 2 of the last 5 years; the periods need not be the same two years. The exclusion can be used once every two years. The calculator uses the shorter of the ownership and use months you enter.

Partial exclusion If you sell before meeting the tests because of a work move, a health reason or an unforeseen event, the exclusion is reduced in proportion: the months you qualified divided by 24 times the full limit. Twelve months of use gives half of the limit. The tool applies this automatically and shows a notice.

Worked example A couple sells for $620,000 with $37,000 of selling costs. They paid $280,000 and spent $40,000 on a new kitchen. Gain is $620,000 minus $37,000 minus $320,000, which is $263,000. They qualify for $500,000, so the whole gain is excluded and the taxable gain is zero. A single owner in the same situation would exclude $250,000 and have a taxable gain of $13,000, taxed at the long-term capital gains rate, 15 percent in the example, which is about $1,950.

Limits Depreciation taken for a home office or a rental use, periods of non-qualified use after 2008 and the 3.8 percent net investment income tax can change the result. Keep records of improvements. This is an estimate and not tax advice.

Worked example

Sale price $620,000, selling costs $37,000, basis $280,000 and improvements $40,000 give a gain of $263,000. A joint filing couple excludes it all; a single owner has a taxable gain of $13,000.