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Will You Owe Taxes When You Sell Your Home?

One of the more controversial aspects of the tax code in the United States is that it effectively incentivizes homeownership. For starters, homebuyers may be able to deduct the mortgage interest on their primary residences and loans for capital improvements, up to certain levels, as well as their property taxes. (From a practical standpoint, many taxpayers can’t take advantage of these deductions because they’re not itemizing deductions on their tax returns.) Additionally, homeowners are able to exclude a share of their profits when they sell their primary residences: $250,000 in home-price appreciation is excludable by single filers and double that amount for married couples filing jointly. (Investment properties don’t qualify for the exclusion, and the homeowner must have lived in the home for two of the past five years.)

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