Sell the Property
Market your home for sale through a real estate office, a self-help real estate marketer or by yourself.
Field prospective bids from interested buyers.
Select the best bid. Price is not the only consideration. A slightly lower bid from a highly qualified buyer may be more valuable than a higher bid from someone with a history of credit problems.
Sell the property to the winning bidder.
Calculate the Basis of the Property and the Amount Realized
Calculate the basis of the property if you bought the home with cash, debt, other property or services. In this case, your cost is the amount you paid adjusted for any increases to basis and/or decreases to basis. Increases to basis include additions and damage restoration. Decreases to basis include casualty losses and depreciation.
Calculate the cost basis of the property if you received it as an inheritance, a gift, as a surviving spouse or in a trade. In this case, your cost is the fair market value of the property when you received it. This amount is then adjusted for amounts increasing or decreasing its basis.
Calculate the amount realized from the sale by subtracting the costs of selling the home from the selling price of the home. Costs include advertising and legal fees, sales commissions and bank fees paid by the seller.
Calculate the Capital Gain on the Property
Subtract the basis from the amount realized. This is your gain.
Calculate the amount of exclusion you can claim on the gain. You may be able to exclude up to $250,000 of the gain from your income.
Subtract the exclusion from the gain. This is the taxable capital gain on the home that was sold.