Lopez & Lopez, REALTORS® · Long Realty Company
9181 E Sugar SumacPre-Listing Brief · Roe
Section 04 · §121 Capital-Gains Brief

The capital-gains math at each tier

Heather has owned this home since September 2018 · over 7 years past the IRS’s 2-of-5 primary-residence test. With Karl on title since 2024 and married-filing-jointly, the federal exclusion is $500,000. Estimated federal capital-gains tax on this sale: zero.

The §121 quick rule

IRC §121 lets you exclude capital gains from the sale of a primary residence you’ve owned and used as your main home for 2 of the last 5 years. Single filers exclude up to $250,000. Married filing jointly excludes up to $500,000 (only one spouse needs to meet the ownership test; both need to meet the use test).

Where Heather sits today

  • Ownership test: Heather has been on title since 2018-09-07 · over 7 years. PASS.
  • Use test: Pima Assessor mailing address = property address · strong signal of primary use. PASS (verify at intake).
  • Karl’s use test: Karl added to title 2024-02-07. He must have used the home as his primary residence for 2 of the last 5 years to unlock the joint $500K exclusion. The 5-year window pushes back to 2021. Confirm with your CPA. Even if Karl falls back to no use, Heather’s solo $250K exclusion still buries the gain.
Line itemVelocity · $359.9KStrategic · $369.9KAggressive · $379.9K
Sale price$359,900$369,900$379,900
Closing & commission (~7%)−$25,193−$25,893−$26,593
Realized amount$334,707$344,007$353,307
Adjusted basis (purchase $247,000 + ~$54,000 improvements)$301,000$301,000$301,000
Realized gain$33,707$43,007$52,307
vs. $250K single exclusionfully shelteredfully shelteredfully sheltered
vs. $500K joint exclusionfully shelteredfully shelteredfully sheltered

What this means in plain English

At every tier on the table, your realized gain after closing costs and the solar improvement basis is well under both the single and joint §121 exclusions. You should owe zero federal capital-gains tax on this sale. That assumes the ownership/use tests pass, which the public record strongly supports.

Two questions for your CPA

  1. Karl’s use test from 2024 forward. Joint $500K exclusion requires both spouses to meet the 2-of-5 use test. Heather clears it. Karl needs primary-residence status for 24 months in the last 60. If he doesn’t, you fall back to Heather’s solo $250K · still well above your gain.
  2. Stack your improvement basis. Solar at $54K is the verified improvement. Anything else material spent since 2018 (HVAC, roof, kitchen, pool resurface, fencing, flooring) adds dollar-for-dollar to basis. Bring receipts · each $10K of additional basis lowers your gain by $10K.

This is not tax advice. Capital-gains figures are estimates based on public record and intake-call data. Confirm with your CPA before relying on these numbers.