Do I Need to Pay Capital Gains Tax When I Sell My Port Washington Home?

Do you need to pay capital gains tax when you sell your Port Washington home?
Maybe — it depends on your profit, how long you’ve lived there, and whether the home was your primary residence. Many Port Washington sellers qualify for full or partial exemptions, but it’s essential to understand how these rules work before listing.

What Is Capital Gains Tax?

Capital gains tax applies when you sell a property for more than you paid for it. The gain — your profit — is calculated as:

Sale Price – (Purchase Price + Improvements + Selling Costs) = Taxable Gain

For example, if you bought your home for $700,000, invested $50,000 in upgrades, and sold it for $1,000,000, your taxable gain would be roughly $250,000.

The IRS Exclusion Rule

Under IRS Section 121, homeowners can exclude a large portion of their profits from federal capital gains tax if the home was their primary residence for at least two of the last five years.

Exclusion Limits:

• $250,000 for single filers

• $500,000 for married couples filing jointly

If your profit falls under these limits, you won’t owe any federal capital gains tax.

Example:

If you’re married and sold your Port Washington home for a $400,000 profit after living there for three years, that gain would be fully excluded.

When You Might Owe Capital Gains Tax

You could owe capital gains tax if:

• You owned the home for less than two years.

• The home was not your primary residence (e.g., an investment or vacation property).

• Your profit exceeds the exclusion limit.

• You’ve claimed the exclusion on another home sale within the past two years.

New York State Capital Gains Tax

New York treats capital gains as regular income, meaning your profit is taxed according to your income bracket — typically between 5% and 10.9%.

Even if you’re exempt from federal capital gains tax, you may still owe state taxes depending on your total income for the year.

Ways to Reduce or Avoid Capital Gains Tax

1. Keep Records of Home Improvements:
   Renovations like a new roof, kitchen remodel, or finished basement increase your cost basis, reducing your taxable gain.

2. Include Selling Costs:
   Real estate commissions, attorney fees, and staging expenses can all be deducted from your gain.

3. Convert to a Primary Residence:
   If you own an investment property, living there for at least two years can help you qualify for the exclusion.

4. Consider a 1031 Exchange:
   If selling an investment property, reinvesting the proceeds into another property may defer taxes — though this doesn’t apply to primary homes.

Always consult a qualified tax advisor to confirm what applies to your situation.

How Eric Berman Helps Port Washington Homeowners

Eric Berman, REALTOR, works with Port Washington sellers to:

• Estimate net proceeds after taxes and fees.

• Identify deductible improvements to lower taxable gains.

• Connect clients with experienced CPAs for tailored financial guidance.

Bottom Line

You may not owe capital gains tax when selling your Port Washington home — but it depends on your profit, ownership history, and residency. Proper planning can help you maximize your proceeds and minimize tax exposure.

Thinking about selling your Port Washington home? Contact Eric Berman for a free home valuation and guidance on how to estimate your potential tax obligations.

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Do you need to pay capital gains tax when selling your Port Washington home? Learn how exclusions, deductions, and planning can minimize taxes with REALTOR Eric Berman.