Most sales of a person’s primary residence are exempt from taxes on capital gains, that is, the difference between the sale price (including some costs of the sale), and your “basis” (what you paid for the home, some costs of the purchase, plus any capital improvements you made to the home). This is generally true as long as the gain is less than $250,000 (or $500,000 for a couple) and the owner has owned and lived in the property at least two out of the last five years. The timing of your sale can affect whether you will owe any capital gains tax, and how much you will owe. You can discuss details of taking advantage of this valuable exemption with your attorney. To calculate your gain, you should keep good records of the purchase and sale of the home, and all capital improvements made while you own it. Tax programs to stimulate home purchases in a down market also may be available. Consult with your attorney or financial advisor if you have questions.
Many of the processes described above apply in any real estate transaction, including the sale or purchase of vacant land and vacation properties. Buying or selling certain types of properties – such as a farm, lake property, condominium, cooperative, investment property, time-shares and so on – also may involve special legal considerations. Investment real estate is subject to capital gains tax; however, it’s possible to create legal arrangements to defer this tax. See an experienced real estate attorney for advice.
This is one in a series of consumer information pamphlets sponsored by the State Bar of Wisconsin. This pamphlet, which is based on Wisconsin law, is issued to inform and not to advise. No person should ever apply or interpret any law without the aid of a trained expert who knows the facts, because the facts may change the application of the law.
Other titles include: Arrest; Bankruptcy; Buying/Selling Residential Real Estate; Choosing a Process for Divorce; Custody and Placement; Durable Powers of Attorney; Divorce; Guardians Ad Litem in Family Court; Health Care; Hiring/Working with a Lawyer; Landlord/Tenant Law; Marital Property; Personal Injury; Probate; Revocable Living Trusts; Small Claims Court; Starting a Business; Traffic Accidents; Wills/Estate Planning.
9/2009. © State Bar of Wisconsin