What is Capital Gains Tax?
Capital gains tax is a tax on the profit you make when you sell a property for more than you paid (plus improvements). For a primary residence, federal rules let many sellers exclude a large portion of the gain if they meet ownership and use tests. Investment properties don’t get the same exclusion, so professional tax advice matters.
Example: A couple sells their long-time primary home at a $400,000 profit and, by meeting the IRS ownership-and-use tests, excludes much of that gain from capital gains tax.