Selling your home will not necessarily have an adverse impact as relates to taxes. When you sell real estate, you are usually subject to capital gains taxes unless you perform a “like kind exchange”, or section 1031 exchange, or reinvestment of the proceeds into another piece of real property. A 1031 exchange is limited to investment property, however, for which a primary residence typically does not qualify.
There is, however an exception, or exclusion, in the case where you sell your primary residence (up to $250,000 if you are filing single or head of household or $500,000 if married filing jointly). In order to qualify for this exclusion, you must meet certain criteria. Firstly, you must have owned the home and used it as your primary residence in 2 of the 5 years prior to sale. Secondly, you must not have acquired the home through a like kind, or section 1031, exchange during the five years prior to the sale. Thirdly, you must not have excluded the sale of a home during the 2 years prior to the sale of the home which you now want to exclude. If these three criteria are met you can exclude $250,000 in figuring the capital gains taxon the home ($500,000 if married filing jointly).