You can exclude up to $250,000 of the gain on the sale of your main home (of $500,000 for married filing jointly) if all you owned and lived in the home for at least 2 of the last 5 years, and if you didn’t sell another home within 2 year.
What this means is that if you spend some money to remodel, the increase in your sales price on the house may be tax free.
For example, say that your house is worth $100,000. But you spend $20,000 to remodel the kitchen and bathroom. If that remodel allows you to sell the house for $130,000, the extra $10,000 you get ($30,000 price increase minus the $20,000 cost of remodel) is tax free.
THE TAX TIPS ON THIS WEBSITE ARE FOR GENERAL INFORMATIONAL PURPOSES ONLY, AND MAY NOT APPLY TO YOUR PARTICULAR TAX SITUATION. PLEASE CONSULT A COMPETENT TAX PROFESSIONAL ABOUT ANY QUESTIONS YOU MAY HAVE.