However, thanks to the Taxpayer Relief Act of 1997, most homeowners are exempt from needing to pay it.1 If you're single, you will pay no capital gains tax on the first $250,000 of profit (excess over cost basis). Married couples enjoy a $500,000 exemption.2 However, there are some restrictions.
Any gain over $250,000 is taxable.
Who qualifies for 0% capital gains in 2025. 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. However, taxable income is significantly lower than your gross earnings.
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.
To avoid paying capital gains taxes (and depreciation recapture), you can reinvest in a "like-kind" asset with a sales price of at least $500,000. The IRS allows virtually any commercial real estate property to qualify as 'like-kind” as long as you hold it for investment purposes.
You can avoid capital gains tax when you sell your primary residence by buying another house and using the 121 home sale exclusion. In addition, the 1031 like-kind exchange allows investors to defer taxes when they reinvest the proceeds from the sale of an investment property into another investment property.
What if I reinvest the proceeds? Buying additional stock shares with the proceeds from a stock sale will not eliminate or reduce capital gains taxes. However, if you reinvest the gain into a QOF (Qualified Opportunity Fund), you can defer the payment of capital gains taxes while you are invested in an eligible fund.
CGT 6-Year Rule
Allows temporary renting of PPOR for up to 6 years while still claiming main residence exemption. – Each 6-year absence period is treated individually. - No limit on number of times you can use this exemption. - Property must have been your main residence before renting out.
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.
Countries that do not impose a capital gains tax include Bahrain, Barbados, Belize, the Cayman Islands, the Isle of Man, Jamaica, New Zealand, Sri Lanka, Singapore, and others.
As of 2022, for a single filer aged 65 or older, if their total income is less than $40,000 (or $80,000 for couples), they don't owe any long-term capital gains tax.
Long-term capital gains of up to ₹1 lakh are exempted from tax. However, please note that as per the latest Union Budget, this limit of ₹1 lakh has been increased to ₹1.25 lakh, which will be effective from FY 24-25.
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.
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.
A: You can defer capital gains taxes by using a tax deferred exchange, which means that you reinvest the windfall from the sale into a replacement property. However, you need to act quickly. If you wait more than 180 days to reinvest, you will have to pay taxes on the proceeds.
To qualify for the principal residence exclusion, you must have owned and lived in the property as your primary residence for two out of the five years immediately preceding the sale. Some exceptions apply for those who become disabled, die, or must relocate for reasons of health or work, among other situations.
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.
Capital gains tax rates
A capital gains rate of 0% applies if your taxable income is less than or equal to: $47,025 for single and married filing separately; $94,050 for married filing jointly and qualifying surviving spouse; and. $63,000 for head of household.
There's no requirement to ever buy another home in order to avoid capital gains taxes when selling your primary residential house. If you sell after two years, you won't pay capital gains taxes on profits less than $250,000 (or $500,000 for jointly owned homes). There's no additional requirement to purchase a new home.
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).