Capital gains tax
Tax on the profit from selling an asset, based on the sale price minus your cost basis. Many homeowners can exclude part of the gain on a primary residence they have lived in long enough.
Also called: capital gains, cap gains, section 121 exclusion
Related terms
What you paid for a property plus certain purchase costs and improvements, minus depreciation taken. It is subtracted from the sale price to figure your taxable gain.
A federal tax rule that lets an investor defer capital gains tax by selling an investment property and buying another under strict timelines and rules. Talk to a tax pro first.
A tax deduction that spreads the cost of a rental building, not the land, over its useful life, 27.5 years for residential rentals. Depreciation taken may be taxed when you sell.
The home you live in most of the year. Loans, tax breaks, and insurance are often better for a primary residence than for a second home or rental.
An IRS form the closing agent files to report the seller's gross proceeds from a real estate sale. Some home sales are exempt from reporting if the seller certifies they qualify.