Tax Traps Lurking in the Shadows of Home Downsizing Homeowners who've recently sold their properties for a significant profit are facing a harsh reality: taxes will likely take a substantial chunk of that windfall.
The IRS allows homeowners to exclude up to $250,000 or $500,000 in profits from capital gains taxes when selling their primary residence.
However, when the sale price far exceeds these thresholds, the taxman demands a significant portion of those profits as taxable capital gains.