10/23/2026
Your house went up in value. Here's how to keep it from the IRS.
If the home has been your main residence for at least two of the last five years, you can exclude up to $250,000 of profit from tax when you sell. Married couples filing jointly can exclude up to $500,000.
The key word is profit, not sale price. Your profit is your sale price, minus your selling costs, minus your cost basis.
Your basis starts with what you paid for the home, plus certain closing costs like title insurance and transfer taxes. Every improvement you make adds to it: a new roof, a kitchen remodel, an addition.
The higher your basis, the lower your profit, and the easier it is to stay under that line. You do have to be able to prove those improvements, so keep the invoices for as long as you own the home.
Your CPA can tell you exactly where your numbers land.
Save this for when you're ready to sell.