Question

jordyn is single. she purchased her first home for $180,000 in 2018. it served as her primary residence until she sold it on november 1, 2022 for $440,000. she paid a $26,400 commission as an expense of sale. during the time she owned her home, she did not use it for business or to produce rental income. what is the amount of her long-term gain that can she exclude from income on her return?

Answer 1

Jordyn can exclude the entire capital gain of $233,600 from her taxable income because it is less than the $250,000 exclusion allowed for a single filer, and she meets the requirement of using the home as her primary residence for at least two out of the five years before the sale.

Step-by-step explanation:

Jordyn's situation involves the calculation of the capital gains on the sale of a primary residence, which under U.S. tax law, can often qualify for an exclusion if certain conditions are met. As a single individual, she can exclude up to $250,000 of gain from her income.

First, we calculate Jordyn's capital gain on the sale of her home:

• Sale price of home: $440,000
• Minus selling commission: $26,400
• Minus original purchase price: $180,000
• Equals capital gain: $233,600

Since the capital gain ($233,600) is less than the allowed exclusion for a single filer ($250,000), Jordyn can exclude the entire gain from her taxable income, given that she meets the criteria for the exclusion - owning and using the home as her primary residence for at least two out of the five years prior to the sale.