Lee and Carol Parton have sold their home for $750,000. They have lived in the home for 22 years. They are planning to retire and travel. They purchased the home for $200,000 and have made $50,000 in improvements. Lee and Carol will owe how much in capital gain taxes on the sale of their home?

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Quizplus · Accepted Answer

The capital gain on the home is calculated by subtracting the purchase price and the cost of improvements from the selling price ($750,000 - $200,000 - $50,000 = $500,000). However, under current U.S. tax law, married couples filing jointly can exclude up to $500,000 of gain on the sale of their primary residence if they have lived in it for at least 2 of the last 5 years. Since Lee and Carol's gain is $500,000 and they meet the residency requirement, they owe $0 in capital gains tax.

Lee and Carol Parton Have Sold Their Home for $750,000