How do they do capital gains tax on a home?

[Rafiki Rafiki Rafiki]

I know if you sell a home and don't reinvest that you're subject to a capital gains tax on the profit from a home.

But what if you sell your house for a profit and then buy one that costs substantially less?

Can someone explain how all that goes? I'm thinking I should keep all the receipts from home renovations to lessen the amount of capital gains tax I have to pay...especially since we're not sure we'll be reinvesting in a new home within the next two years.

 

[tar heel]

That law has been changed. You now are exempt from $250,000 of profit on a home, $500,000 for a couple. There was a time when you had to buy a more expensive house, but that's been changed.

 

[Rafiki Rafiki Rafiki]

thanks so much, tar heel! I'm so excited--and finally am believing that we're going to get ahead for once....

 

[Dan Murphy]

You do have to have owned and lived in home for two years also, and have had at least a two year break from a previous sale of a previous home.

(not to be considered tax advice)