Final answer:
Yes, a taxpayer may be required to pay tax on a gain realized from the sale of her principal residence if the gain exceeds the allowable exclusion amount. Capital gains on a principal residence are subject to taxes, but exclusions apply that can significantly reduce or eliminate the tax liability.
Step-by-step explanation:
A taxpayer may indeed be required to pay tax on a gain realized from the sale of her principal residence. When selling a principal residence, a taxpayer may have a capital gain, which is the difference between the selling price and the purchase price of the home, after accounting for certain allowable expenses and exclusions. In the U.S., capital gains tax could be levied on this profit if it exceeds certain thresholds. It is important to note that as of recent tax laws, individual taxpayers may exclude up to $250,000 (or $500,000 for married couples filing jointly) of capital gains on the sale of their primary residence, provided they have lived in the home for at least two of the five years preceding the sale.
The subject of capital gains tax on a principal residence falls within the broader context of the U.S. tax system, where taxes are based on the benefit principle of taxation and the ability-to-pay principle. Property taxes, for instance, are typically imposed by municipal governments based on the value of real estate property and are separate from income and capital gains taxes. The U.S. tax system is progressive, meaning that as a person's income increases, they not only pay more in tax, but also a larger fraction of additional income in tax.