This guide is general information, not tax advice. Confirm your specific numbers with a CPA or tax professional.
What are capital gains on a home sale?
Capital gains are the profit you make when you sell a property for more than your cost basis (generally what you paid, plus improvements). When you sell a house in Massachusetts, you may owe federal capital gains tax and Massachusetts state tax on that profit, depending on how much you gained and whether the home was your primary residence.
The primary-residence exclusion
If the home was your main residence for at least two of the last five years, federal rules generally let you exclude up to $250,000 of gain if you are single, or up to $500,000 if you are married filing jointly. Many homeowners who sell their long-time primary home owe little or no capital gains tax as a result.
Investment and inherited properties
Rental and investment properties do not qualify for that exclusion, though a 1031 exchange may let you defer the tax by reinvesting. Inherited homes usually get a stepped-up basis to the date-of-death value, which often means little gain if you sell soon after inheriting.
Ways people reduce the tax
- Keeping records of capital improvements, which raise your basis
- Meeting the two-year primary-residence rule when possible
- Using a 1031 exchange for investment property
- Timing the sale in a lower-income year
Selling a house in Western Massachusetts?
Whether it is a primary home, a rental, or an inherited property in Springfield or Hampden County, Western Mass Cash Home Buyers can give you a fast, no-obligation cash offer so you can plan around your tax situation. Call (413) 288-4889 to talk it through.