Wednesday, April 23, 2025
As property values rise, Utahns can be hit with hefty tax bills after selling a home.
Urban Living
Posted By Babs De Lay on April 23, 2025, 4:00 AM
April 15 has come and gone. That means you either filed your federal and state taxes—or you didn't! Some of you may have sold a primary residence last year and may or may not have had to pay taxes on the profit on that sale, called "capital gains."
Back in the day, homeowners had to keep track of all the improvements to their property before selling, according to IRS tax rules. But taxpayers would basically get a "once in a lifetime" deduction of real estate profits if they were 55 years old or older in what was called the "rollover rule." This rule allowed a home seller to postpone taxes on the profits (gains) on their sale as long as they bought another home of equal or greater value within two years.
That was a difficult formula to figure out and, unfortunately, many older folks still think this is the tax law in place because they haven't sold a primary residence in decades. In 1997, then-President Bill Clinton signed into law a much simpler revision: if you're single, you can write off a profit of $250,000 on the sale of your home; or $500,000 if you're married.
Given that homes have doubled or even tripled in value over the past few decades, this law has benefitted millions of taxpayers. For example, if you bought a Sugar House bungalow for $350,000 several years ago and are single, and if you sold it last year for $750,000, that would mean you have a gain of $400,000. If you deduct the $250,000 as a single taxpayer owning a primary residence, you'd have a tax liability of $150,000.
And no, that doesn't mean you would owe $150,000 to the IRS. Your annual income would come into play—one online calculator finds that a person making $80,000 per year would owe $88,840 in taxes on the sale described above.
Then again, if you sold for less than you paid for the home, you'd have a loss and would not have to pay taxes on that sale. And the rules are different if the taxpayer acquired the home as a gift from a relative or as part of an inheritance.
Sen. Bernie Sanders believes that the current capital gains tax is a "tax break" that excuses investors from paying their fair share, while many Republicans—including President Donald Trump—want to lower the tax rate to supposedly increase individual savings and investments.
I'm not a CPA, and after taking required accounting classes for one of my college degrees, I knew I never wanted to be a bean counter.
But I am happy my sister elected to be one, so I didn't have to figure out the myriad of tax forms every year! For more info, go to irs.gov/forms-pubs/about-publication-550.
About The Author
Babs De Lay
A full-time broker/owner of Urban Utah Homes and Estates, Babs De Lay serves on the Salt Lake City Historic Landmark Commission. A writer and golfer, you'll find them working as a staff guardian at the Temple at Burning Man each year.
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