Capital Gains Tax

Capital gains on the sale of a principal residence are taxed differently from other real estate, due to a special exclusion. Basically, the first $250,000 of an individual’s profit on the sale of a home is excluded from their income for that year, as long as the seller has owned and lived in the home for two years or more. For married couples filing jointly, the exclusion is $500,000. (Internal Revenue Service. “Topic No. 701: Sale of Your Home.” Accessed Feb. 25, 2020.)


In addition to regular capital gains tax, some taxpayers are subject to the net investment income tax. It imposes an additional 3.8% tax on your investment income, including your capital gains, if your modified adjusted gross income is greater than:

  • $250,000 if married filing jointly or a surviving spouse
  • $200,000 if single or a head of household
  • $125,000 if married filing separately


The Tax Cuts and Jobs Act changed the breakpoints for the basic capital gains rates to align with taxable income (not tax brackets). Research the THE THREE LEVELS OF LONG-TERM CAPITAL GAINS TAX, 2019: Internal Revenue Service. “Rev. Proc. 2018-57,” Page 11. 

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This article was provided by Sarah Marrinan. Find more great info about Sarah on this website at


As a Certified Residential Specialist with multiple additional real estate designation, certifications, awards and experience, if you’re thinking of selling or buying, Sarah Marrinan would love to share her knowledge and expertise. Proudly servicing the Twin Cities, MN with extra focus in these areas: White Bear Lake, Hugo, Lino Lakes, Centerville, Vadnais Heights, Shoreview, Mounds View, Circle Pines, Mounds View, Mahtomedi, Forest Lake, Columbus, Wyoming, Saint Paul, Minneapolis, Roseville, Lake Elmo, Stillwater and Oakdale, MN.
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