There are many questions about how capital gains works when it comes to your house after you’ve sold it. Your gain is actually your home’s selling price, minus deductible closing costs, selling costs, and your tax basis in the property; your basis is the original purchase price, plus purchase expenses, plus the cost of capital improvements, minus any depreciation and minus any casualty losses or insurance payments. Here are the most frequent types of property taxes that are exempt.
Homestead: These exemptions keep you from paying tax on a certain portion of your home value. In some states, the homestead exemption depends on factors such as age or income level. Each states have their own rules and deadlines, so be sure to check.
Seniors : Many states offer pretty good property tax exemptions to both older homeowners and disabled persons that may allow them to seek property tax refunds and reductions in real estate assessments.
Veterans: A lot of military veterans have their own set of exemptions. These exemptions usually are approved if they used the home as their primary residency, served in a war, or were honorably discharged. Some states offer property tax exemptions to all veterans. Others target disabled vets. Parents and widows of disabled service members may also qualify for property tax exemptions.
Energy Incentives: If you have installed renewable energy systems in your house, you could also write off your energy bills. Some states exclude the value of certain green improvements from a home’s real estate assessment. Eligible upgrades may include the installation of solar panels, to name one example.
The Bottom Line
Savings from exemptions will vary widely depending where you live, the value of your home, and what you qualify for. Whether or not you want to invest the time into researching all of the possible exemptions is up to you. For further clarification, check out this article by Fox Business Capital Gains & Your Home Sale
For an in-depth analysis, watch this video How Capital Gains Tax Works.