The IRS Gives Home Sellers a Massive Break — Are You Using It?

If you’re thinking about selling your home in 2026, now is the perfect time to get ahead on the tax side of things. Most homeowners don’t realize how many simple steps they can take right now — at the end of the year — to make the selling process easier and potentially save thousands when it comes time to file.

Here are the biggest tax benefits homeowners overlook when preparing to sell.

The Capital Gains Exclusion

If your home is your primary residence, you may qualify for one of the biggest tax breaks available:

• $250,000 tax-free profit (single)

• $500,000 tax-free profit (married)

That’s not a deduction — that’s up to a half-million dollars of profit you don’t pay taxes on.

To qualify, you simply need to have:

• Lived in the home for 2 of the last 5 years

• Owned the home for 2 of the last 5 years

Most folks qualify without even realizing it.

Start Tracking Your Capital Improvements Now

This one is HUGE.

Anything you spend that improves your home, meaning it adds value, extends the life of the property, or adapts it to new uses, can help reduce your taxable gain.

Examples include:

• New roof

• HVAC system

• Windows

• Kitchen or bath updates

• Finished basement

• Deck or patio

• New flooring

• Plumbing or electrical upgrades

If you’ve done ANY of these, save the receipts.

If you’re planning ANY of these before selling in 2026, keep the paperwork.

Most sellers don’t track this stuff and it costs them.

Selling Costs Can Reduce Your Taxable Gain

When you sell, the IRS lets you subtract certain selling expenses from your profit. These reduce your taxable gain (not the cash you walk away with, but the number the IRS looks at).

These can include:

• Real estate commissions

• Transfer tax

• Certain title fees

• Appraisal fees (in some cases)

• Home improvements made within 90 days of selling that prepare the property for market

It all adds up.

Understand the 2-of-5-Year Rule Before You Move

This one trips people up, especially if they turn their home into a rental or move before selling.

If you’re planning to sell in 2026 but thinking of renting your home in the meantime, make sure you don’t fall outside the 2-out-of-5-year window — or you could lose your $250k/$500k exclusion.

If you’re unsure about timing, let’s walk through it together. A quick conversation now can save a massive tax bill later.

It’s Worth Talking to a Tax Professional Early

Especially if:

• Your home’s value has increased significantly

• You’ve owned the property a long time

• You’ve made major improvements

• You’re unsure how depreciation works on a prior rental

A quick year-end conversation with a CPA can help you get ahead instead of playing catch-up next spring.

What Sellers Should Be Doing Right Now

Here’s the simple end-of-year prep I recommend:

✔  Save receipts for ALL capital improvements

✔  Create a list of upgrades completed in the last 10 years

✔  Note your purchase price and year

✔  Review whether you meet the 2-of-5-year rule

✔  Start a “Home Sale Tax Folder”

This takes less than 10 minutes and puts you way ahead of most homeowners.

If you’d like my “Home Seller Tax Prep Sheet” a simple one-page tracker for your improvements, timelines, and costs just send me a message and I’ll send it to you.

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