ArcaMax

Q: In 1963, we bought a home for $17,900. We sold it a few years later for $19,500. That’s when we bought our present home for $30,000. We are now selling it for around $300,000. Will we have to pay taxes on the sale?

A: The good news is that if you’re married, you and your spouse get to exclude $500,000 from federal income tax taxes when you sell your home. We will point out that this exclusion from federal income taxes applies to homeowners that have owned their home for two out of the last five years as their primary residence. Each owner gets a $250,000 exclusion, so if you own your home by yourself, you’d be able to exclude up to $250,000 in profits.

Did you make any material or structural improvements to your home over the last 60 years? Did you build an addition or replace the roof or mechanical systems? The Internal Revenue Service allows you to deduct the cost of material or structural improvements, along with the costs of purchase and sale, including any broker commission.

Given that many people will pay around 5% or 6% commission on the sale of the home, that commission would come to around $15,000 to $18,000. You’ll also have other costs to sell the home including settlement and closing fees, and, maybe, transfer tax fees. With this in mind, we doubt that you’ll end up having to pay any federal income taxes on the sale of your home.

In your example, you’ve had a nice appreciation in the value of the home from $30,000 to $300,000 or an increase in value of $270,000. But after you subtract the commission and your costs of improvements, we think your actual profit is likely less. But in any case, you and your spouse would be entitled to exclude the full $500,000.

You can get quite a bit of information on how to compute the tax you’d pay the federal government from the Internal Revenue Service (IRS) website and look over Publication 523. This publication will go over how to determine your cost basis and what improvements go toward reducing any federal income taxes you would owe. It will give you an extensive checklist of those improvements along with the purchase and selling costs that can go into the figures.

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(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)

©2025 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.