Are profits gained from selling a house taxable?

Under federal law, you can likely exclude up to **$250,000** of gain (or **$500,000** if married filing jointly) from your income if the home was your primary residence. To qualify for this Section 121 exclusion, you must have owned and lived in the home for at least two of the five years leading up to the sale. Massachusetts generally follows federal law regarding the capital gains exclusion on the sale of a principal residence. If you qualify for the federal exclusion, that same amount is typically exempt from Massachusetts state income tax. **Key Considerations:** 1. **Cost Basis:** Your taxable profit is the sale price minus your "adjusted basis" (purchase price plus qualifying capital improvements and closing costs). 2. **Over the Limit:** Any profit exceeding the $250k/$500k thresholds is taxed at federal capital gains rates (0%, 15%, or 20%) and the Massachusetts flat rate (currently 5%, plus a potential 4% surtax if your total annual taxable income exceeds $1 million). 3. **Second Homes:** If this was a secondary residence or rental property, these exclusions do not apply in the same way. If you lived there less than two years, you may only qualify for a partial exclusion under specific "unforeseen circumstances."