There are only two things certain in life: death and taxes. While we can’t help you much on the first one, there are great ways to minimize your taxes when selling your home.
When you sell your home, you are exempt from paying income taxes on the profit, up to $250,000 (if single), or $500,000 (if married). You don’t need to be any minimum age, nor do you have to buy another home. The only requirement is that the home was your personal residence for 2 of the last 5 years. This tax exemption can be used repeatedly, but no more than once every 2 years.
If you sell in less than 2 years, you might be eligible, but the exemption amount is prorated. For example, if you are single, and you only lived in the house for 12 months, and then you relocate due to job change or health reasons, you would be eligible for tax free profit of $125,000 (50% of $250,000).
You may be able to sell your home and buy another home and keep your old property tax level, in certain counties in California. One of the owners must be at least 55 years old, and the purchase price of the new home must be no more than the sales price of the old one. You can only do this once.
For example, let’s say you sold your current home for $800,000. Having owned it for 20 years, your property taxes are $3,000/year. Now you buy a townhome for $600,000. If you are over 55 years old, you can transfer your property tax base from the old house to the new townhome, keeping your property taxes at $3,000/year, half the normal rate!
This rule works for moves within any county in California. It also works for moves for one county to another in California, but only for certain incoming counties (San Mateo, Santa Clara, Alameda, Los Angeles, Ventura, Orange, and San Diego counties).
There are also exceptions to this rule which allow you to purchase a home for up to 110% of the sales price of your old home, if you buy the new home 1 year after the sale of the old one.
Check with your tax accountant for more details.