Tax Rules When Selling Your Home
How the gains from the sale of a primary residence are taxed has changed in recent years. If you have recently sold your home or are considering doing so, you may want to be aware of these new rules.
Federal Gains
If you owned and lived in your home for two of the last five years before the sale, then up to $250,000 of profit may be exempt from federal income taxes. If you are married and file a joint return, then it doubles to $500,000.1
To qualify for this exemption, you cannot have excluded the gain on the sale of another home within two years of this sale. If your gain exceeds the exclusion amount, the remaining portion is generally taxed at long term capital gain rates.
Further, you may be subject to Net Investment Tax (NIIT) if your income is above certain thresholds. Please consult a professional with tax expertise regarding your individual situation.2
If the gain is less than the threshold, the profit would be excluded from your taxable income. In fact, the sale may not need to be reported unless you receive a Form 1099-S or do not meet the above requirements.
If you sold your home at a loss, unfortunately, you can't deduct the loss.
Nebraska Gains
Qualifying for the federal exclusion often allows for the state exclusion on your Nebraska state income tax return. Sales above the exemption amount are taxed as capital gains which in Nebraska is taxed as personal income.
There Are Exceptions
Even if you do not meet the above requirements, you may qualify for this exclusion:
• If you receive the house in a divorce settlement
• If you are able to count short-term absences as time lived in the house
• If a surviving spouse who has not remarried can count the time that the deceased spouse lived in the house.1
The five-year test period can also be suspended for up to ten years in cases where any spouse has served on "qualified official extended duty" as a member of the military, foreign service, or federal intelligence agencies.
Even if you don't pass the five-year rule test, a reduced exclusion may be available if you have a change in employment or health, or because of unforeseen circumstances, such as divorce or multiple births from a single pregnancy.
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1. IRS.gov, 2025
2. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Financial professionals are not tax advisors or Social Security experts. For information regarding your specific tax situation, please consult a tax professional. To discuss your specific SSA benefits, please contact the SSA office in your area.
The content is developed from sources believed to provide accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
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While it was a very volatile first half of the year from both a fundamental and market perspective, investors can draw two valuable lessons: the importance of diversifying and staying invested for the long term.
Globally diversified investors profited, with international equities dramatically outperforming their U.S. counterparts by over 1,200 bps. Part of this outperformance was due to a falling U.S. dollar, with the greenback ending the first half down 10.7%. The benefits of diversification were also evident in fixed income, which generated solid returns and, as importantly, provided stability when risk assets were down. Commodities achieved steady returns despite geopolitical challenges. Cash returned 2.1%, which, while positive, serves as a further reminder that taking a “wait and see approach” does not achieve the best long-term results.
However, the first half of 2025 also reminded investors of the importance of staying invested and not trying to time the market. As shown in this week’s chart of the week, U.S. stocks saw major drawdowns within the first half, with large caps declining 18.9% and small caps falling 24.5%. But, by the end of the first half, large caps had rebounded and small caps were only slightly down. Investors who stayed diversified and stayed invested fared the best in the first half of 2025.
On average, valuations ended 2025 higher, but broad areas of global financial markets still seem reasonably priced. As we move into the second half of the year investors should focus on diversification and portfolio rebalancing, and take advantage of the resilience provided by alternative asset classes.
Chart of the Week: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management. Returns shown are total return as of June 30, 2025 unless stated otherwise. *Maximum drawdown for equities calculated using price return and reflects largest peak to trough drawdown during the year.
Thought of the Week: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor's, J.P. Morgan Asset Management.
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R,
top to bottomare: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stockmarket, and
is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures
the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results.
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