Key Takeaways
You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. This exemption is only allowable once every two years.
Current tax law does not allow you to take a capital gains tax break based on your age. In the past, the IRS granted people over the age of 55 a tax exemption for home sales, though this exclusion was eliminated in 1997 in favor of the expanded exemption for all homeowners.
For example, in 2024, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or below. However, they'll pay 15 percent on capital gains if their income is $47,026 to $518,900. Above that income level, the rate jumps to 20 percent.
Exempt assets
As already mentioned, some assets are specifically exempt from CGT. Some of the most common examples are: private motor cars, including vintage cars. gifts to UK registered charities.
Capital gains taxes generally only apply to assets held in a taxable account like a bank or brokerage account. Assets held in tax-advantaged accounts, such as an IRA or 401(k), avoid capital gains taxes on the sale of an asset.
Capital gains taxes: These are taxes paid on the appreciation of any assets that an heir inherits through an estate. They are only levied when you sell the assets for gain, not when you inherit.
An easy and impactful way to reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
A stepped-up basis is a tax provision that allows heirs to reduce their capital gains taxes. When someone inherits property and investments, the IRS resets the market value of these assets to their value on the date of the original owner's death.
If it's your primary residence
You can sell your primary residence and avoid paying capital gains taxes on the first $250,000 of your profits if your tax-filing status is single, and up to $500,000 if married and filing jointly. The exemption is only available once every two years.
Unfortunately, there's no age limit to paying capital gains tax. However, you can manage and even reduce your tax burden with the right strategies and information. Here are the basics about capital gains tax rules and rates as well as some tax-saving tactics.
Here's how it works: Taxpayers can claim a full capital gains tax exemption for their principal place of residence (PPOR). They also can claim this exemption for up to six years if they move out of their PPOR and then rent it out. There are some qualifying conditions for leaving your principal place of residence.
The exemption is available to the assessee, who may be a person or a Hindu Undivided Family (H.U.F). The new residential property must be built or acquired within 36 months of the capital asset sale date, or it needs to be bought 12 months before or 24 months after the asset sale.
A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.
Starting in 2025, single filers can qualify for the 0% long-term capital gains rate with taxable income of $48,350 or less, and married couples filing jointly are eligible with $96,700 or less.
Social Security and capital gains
Keep in mind that up to 85% of Social Security benefits can be subject to tax depending on your overall income, including capital gains. The calculation that determines how much of your Social Security benefits are taxable includes realized gains.
Use a 1031 Exchange to Defer Capital Gains
It's a popular way to defer capital gains taxes when selling a rental home or even a business. Often referred to as a “like-kind” exchange, this tax deferment strategy is defined in Section 1031 of the Internal Revenue Code.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
Determine the cost basis of your assets, which is the original value of the asset, plus any improvements and minus any depreciation. Subtract the cost basis from the selling price. The resulting number is your capital gain (or loss).
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.