Do I Have To Pay Capital Gains Taxes if I Am Over 55? (2024)

The Over-55 Home Sale Exemption was a provision in U.S. tax law that historically allowed individuals aged 55 and above to claim a tax break on the sale of their homes. However, this specific exemption was replaced in 1997 with a broader homeowner exemption policy. Contrary to some outdated information, the current tax legislation does not provide any capital gains tax benefits based solely on a homeowner's age. Nowadays, all homeowners, regardless of age, are eligible for a specific exemption on capital gains from home sales as long as they meet specific residency and ownership criteria.

The rules around capital gains levies and the exclusions and deferral of those taxes are complex. Furthermore, Congress frequently adjusts and refines the relevant tax provisions, which adds to the confusion.

At what age do you no longer have to pay capital gains tax?

Capital gains taxes—whether levied on investment property, other investments like stocks, or your personal residence—are not determined based on the taxpayer’s age. Seniors don't receive any specific capital gains-related benefits, although taxpayers receive an additional income tax deduction when they reach age 65. The extra deduction can add $1,850 to your standard deduction if you are filing individually or $1,500 for each eligible person when filing jointly.

Does my age affect how much I pay in capital gains taxes?

The taxpayer’s age is not a direct determinant in the amount or percentage of capital gains taxes due on asset appreciation. However, if your total income is lower in retirement, you will pay a smaller tax percentage on a gain.

Long-term capital gains taxes range from zero to 20 percent, compared to ordinary income, which can reach a marginal rate of 37 percent. Remember that short-term capital gains (on assets you have held for less than a year) are taxed at the ordinary income level. The amount of total income determines the tax rate for a long-term capital gain:

How much will I pay in capital gains when I sell my home?

As noted, the long-term capital gains tax amount depends on your overall income, whether you are 30 years old or 99. You can take specific steps to reduce or defer the tax due at any age. For example, every taxpayer is eligible for an exemption to the capital gains tax on their primary residence as long as they meet these criteria:

1. Have lived in the residence for at least two of the most recent five years.
2. Have owned the residence for at least two of the last five years.
3. Have not claimed the exemption within the last two years.

Taxpayers can exclude up to $250,000 in gains when filing as an individual and up to $500,000 when filing jointly as a married couple.

Another consideration is the timing of the sale that you expect to pay taxes on. If you expect your income to drop in the future, it might make sense to wait until that tax year to complete the planned sale. If your income falls below the tax threshold, you may save on the taxes due. Another option is to time a capital gain to coincide with a loss. Suppose that you sell property at a loss in one year. If you sell another asset for a profit that year, you can balance the loss against the gain to reduce the overall taxes due.

These tactics are not age-related but can help you manage your taxes over time.