1. You own the home for at least 2 of the preceding 5 years before selling it.
2. You use the home as your primary residence for at least 2 of the previous 5 years.
3. You have no excluded capital gains tax from any other sale within the last 2 years.

When you sell an investment or rental property, you may be able to deduct certain selling expenses from your taxes. These deductible selling expenses can include advertising, broker fees, legal fees, and repairs made as part of the home sale. To deduct these expenses, itemize them on your tax return.

1. Start with the original investment in the property.
2. Add the cost of major improvements.
3. Subtract the amount of allowable depreciation and casualty and theft losses.

For the 2023 tax year, individual filers won't pay any capital gains tax if their total taxable income is $44,625 or less. The rate jumps to 15 percent on capital gains, if their income is $44,626 to $492,300. Above that income level the rate climbs to 20 percent.

What form(s) do we need to fill out to report the sale of rental property? Report the gain or loss on the sale of rental property on Form 4797, Sales of Business Property or on Form 8949, Sales and Other Dispositions of Capital Assets depending on the purpose of the rental activity.

However, sellers do pay a grantor tax, which is $0.50 for every $500 of value. Sellers in Northern Virginia pay an additional grantor tax of $0.10 for every $100 of value. Depending on when you sell your home, you may need to pay a portion of your property tax bill for the year, too.