It is true in most cases.
When you sell your home, the capital gains on the sale are exempt from capital gains tax.
Based on the Taxpayer Relief Act of 1997, if you are single, you will pay no capital gains tax on the first $250,000 you make when you sell your home.
Married couples enjoy a $500,000 exemption.
How do I avoid paying capital gains tax on property?
If you sell rental or investment property, you can avoid capital gains and depreciation recapture taxes by rolling the proceeds of your sale into a similar type of investment within 180 days. This like-kind exchange is called a 1031 exchange after the relevant section of the tax code.
Is selling personal property taxable income?
More to the tax point, you’re selling them for less than you paid for them. In discussing sale of personal items in Publication 525, the IRS says, “if you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain.”
How long do you have to live in your house to avoid capital gains tax?
To get around the capital gains tax, you need to live in your primary residence at least two of the five years before you sell it. Note that this does not mean you have to own the property for a minimum of 5 years however. Once you’ve lived in the property for at least 2 years, you’d reach capital gains tax exemption.
What do you pay capital gains tax on?
Capital gains tax (CGT) becomes payable when you sell an asset such as a business, a second property, shares or an heirloom and make money from the sale. The amount you pay depends on your income – basic-rate income tax payers are liable for CGT at 18 per cent, those on higher rates of income tax pay 28 per cent.