Any property you own and use for investment purposes is classified as a (capital asset). Your home, likely one of your largest assets, falls into this category. When you sell it for a profit, you are taxed on the difference between your original purchase price and the sale price. The standard federal tax rate for capital gains is 15%, though you might also be subject to state and local taxes. However, there are ways to reduce the amount you pay in taxes on the profit.

The main strategy for avoiding capital gains taxes is to live in the home as your primary residence for at least (two out of the last five years). If you meet this requirement, you can avoid paying taxes on up to ($250,000) and ($500,000 married) of the profit. Additionally, you may be able to deduct costs for significant improvements you’ve made to the property (such as renovations, upgrading systems, or adding amenities like a pool). Be sure to keep all receipts and documentation for these upgrades. The commission you pay to a real estate agent for selling your home is also deductible. In some cases, it may be possible to “roll over” the profit into the purchase of another property. It’s always a good idea to consult a tax professional or attorney for more detailed advice as it may change.