Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

How much capital gains tax exemption do single homeowners have when selling their principal residences?

1. $100,000

2. $250,000

3. $300,000

4. $400,000

The correct answer is: $250,000

Single homeowners selling their principal residences can exclude up to $250,000 of capital gains from taxation. This exemption is part of the Internal Revenue Code Section 121, which provides this benefit to encourage home ownership and support homeowners when they sell their primary residence. To qualify for this exclusion, the homeowner must have owned the property for at least two years and used it as their primary residence for two out of the five years preceding the sale. This means that any profit from the sale of the home, up to the $250,000 limit, will not be subject to federal income tax, effectively allowing homeowners to benefit more from their investment. Homeowners who are married and file jointly can exclude up to $500,000 of capital gains, which is where some confusion might arise. However, for single individuals, the correct exemption amount is indeed $250,000. This tax provision is significant as it can provide substantial savings on what could otherwise be a considerable tax liability when selling a home that has appreciated in value.