Do I Pay Taxes When I Sell My House in Massachusetts?

Often less than people fear. If the home has been your primary residence, the federal home sale exclusion can shelter up to $250,000 of gain for a single filer and up to $500,000 for a married couple filing jointly, generally if you owned it and lived in it for at least two of the last five years. Massachusetts generally follows the federal treatment. Gains above the exclusion, and gains on rentals and second homes, are taxed. Talk to a tax professional before you list, not after closing.

This is general information, not tax advice.

What counts as "gain"?

Roughly, your sale price minus selling costs, minus what you paid for the home plus the cost of capital improvements (a new roof, an addition, a kitchen remodel). Keep your improvement receipts. They lower your gain.

When does the exclusion not apply, or not fully?

• Rental and investment property. No home sale exclusion. Depreciation you took is usually taxed back ("recapture"). Some investors use a 1031 exchange to defer the tax.
• Second homes.
• Homes you haven't owned and lived in long enough. A partial exclusion can apply in some situations, such as a job move.
• A multifamily you lived in. The part you lived in and the rented units are treated differently.

What taxes show up at closing?

Massachusetts charges a deed excise tax (tax stamps) that the seller usually pays at closing. It shows up on your settlement statement. See seller closing costs. Your property taxes are adjusted between you and the buyer as of the closing date.

When should I bring in a professional?

Before you list, if any of these apply: a large gain, a rental or multifamily, an inherited home, a divorce, or a plan to buy again soon. When I'm helping a family through a big sale, I recommend a financial advisor and a tax professional early, so the money is protected and the timing works.

Questions people actually ask.

Do I have to buy another house to avoid the tax?

Not for a primary residence. That was an old rule. Today the exclusion applies whether or not you buy again.

Is the gain on an inherited home taxed?

Often very little, because the cost basis usually steps up to the value at the date of death. See selling an inherited house.

Will I get a tax form after closing?

The closing attorney typically reports the sale to the IRS on Form 1099-S.

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This article is general information about Massachusetts real estate, not legal, tax, or financial advice. Every property and transaction is different. For advice on your situation, talk with me and, where appropriate, an attorney, lender, or tax professional.