Joe and Mary sell their primary home for $450,000.

Question

Joe and Mary sell their primary home for $450,000. They had purchased it 5 years before for $200,000 and lived there, installing a pool and a deck at a cost of $40,000, re-coating the roof at a cost of $1,000, finishing the unfinished basement at a cost of $50,000 and painting the house at a cost of $7,000. Settlement charges when they bought the house were $5,000, and $8,000 when they sold it. They paid $3,000 to stage the house for showing one month before it was sold. How much is their gain or loss on the sale? What are the tax consequences of this?

Answer 1

Zero. Assuming Joe and Mary are married, under the current tax rules, Joe and Mary would be able to exclude up to $500k in gain on there personal return. The additional information about improvements to the home would help increase the basis of the home, to minimize the gain. However, because the exclusion is higher than the total amount of the gain without the improvements, this information is not needed.