05/28/2026
When you have to pay a TAX capital gain selling your primary residence. It’s very important information for widowed spouses.
⚖️ The home sale exclusion lets joint filers exclude up to $500,000 in capital gains when selling a primary residence. Single filers exclude up to $250,000.
To qualify, you must have owned the home AND used it as your primary residence for at least 2 of the 5 years before the sale. Those are two separate tests, both required.
The $440,000 gain in the right column uses the original 2003 cost basis. A step-up in basis on the deceased spouse's share reduces the actual taxable gain. The amount depends on what the home was worth at the time of death and whether you are in a community property or common law state.
In community property states, both halves of the home receive a step-up at death, which can significantly reduce or eliminate the gain before the exclusion even applies.
The surviving spouse can still claim the full $500,000 exclusion if the sale happens within 2 years of the death and the survivor has not remarried before closing.
On a home with $440,000 in gains and no step-up benefit, that timing difference is roughly $28,500 in federal capital gains tax. State taxes may apply on top of that.
The $250,000 and $500,000 exclusion limits have not been adjusted for inflation since 1997. In higher-cost markets, gains now routinely exceed the cap.
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The content shared here is for educational and informational purposes only. It is not personalized investment, tax, legal, or financial advice. Consult a licensed professional before making decisions based on your specific situation.
