In the last few years, the way capital gains are taxed when selling a primary residence have changed. You’ll want to review the rules if you are considering putting your house up for sale or have recently sold your home.

Selling Your Home in Oregon 

Did you own and live in your home for at least two of the last five years before selling it? If it was your primary residence for two years minimum, up to $250,000 of the profits from your home may be exempt from federal income taxation. If you are married and file federal income taxes jointly, this doubles so that $500,000 is exempt from taxes. However, if you sold another home within two years and excluded the gain on its sale, you cannot exclude the gains of a second home in the same two-year period. If you have not excluded another sale from your taxes over the last two- year period, the profits can be excluded from your taxable income in most cases. 

The sale doesn’t even have to be reported unless you received a Form 1099-S. If you didn’t receive a Form 1099-S or you do not meet the requirements previously stated, then you will need to report the profits as part of your income for the year. Unfortunately, you can’t deduct the loss if you sold your home and lost money on the transaction. 

Other Tax Exceptions 

You may qualify for an exclusion even if you failed to meet the other requirements. Some examples include: 

• The house was received in settlement during divorce proceedings. 
• You can count short-term absences as part of the time you resided in the house. 
• If you are a surviving spouse and haven’t remarried, you can count the time it was the primary residence of the deceased spouse. 

This five-year period can be suspended up to 10 years in some cases. This applies if one spouse served in the foreign service, as part of a federal intelligence agency, or as a member of the military on “qualified official extended duty.” You may also be eligible for a reduced exclusion if you have had a substantial change in your health, employment, or due to other unforeseen circumstances. This could include things like a divorce or multiple births from a single pregnancy. 

Property Taxes and Appraisals 

In Oregon, county assessors are tasked with appraising most properties. An appraisal identifies taxable property and gives it a value. A property’s value is determined as of January 1 of each year. Property that can be taxed includes privately owned real property. This includes the land, fixed machinery or equipment, manufactured homes, and buildings including the primary residence and other structures on the property. The appraisal can also include personal property that is used as part of a business. Taxes are accessed from this determined value. However, certain types of investment properties may be exempt from capital gains taxes. Under Section 1031 of the US IRS Code, some types of investment properties are eligible for a tax deferral. 

Who can help? 

If you are selling your home, or have recently sold your home in Eugene, Oregon, it’s helpful to know if  you have to pay taxes on capital gains. You can talk to a professional tax preparer or your accountant to determine if you are exempt from paying taxes on the sale.