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Selling the House You've Owned for Decades: When the Gain Tops $250,000 or $500,000

A red-brick ranch house with white shutters behind a wide green lawn, with a sticky note reading “Over $250,000?”.
Photo by Roger Starnes Sr on Unsplash

A married couple selling their home can leave up to $500,000 of profit off their federal return, and a single filer half that. Those limits haven't moved since 1997. After decades in one house, plenty of owners are already past them. When a spouse dies, the smaller one can suddenly apply. Two rules soften that, and both run on dates you'll want to know before anyone puts up a sign.

See the two rules after a spouse dies

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By Ray Castellano · Updated Oct 15, 2026 · Reviewed against IRS (Publications 523 and 551, Rev. Proc. 2025-32, Net Investment Income Tax Q&A), CMS, 20 CFR 418.1135, govinfo.gov, National Association of Realtors

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Only part of the profit is ever taxed. You start with the sale price, take off the commission and closing costs, take off your basis, and the exclusion comes off whatever's left. Your basis, roughly what you paid plus what you've put into the house since, is the number plenty of long-time owners have never added up.

Filing status moves the result too. In one worked example, a single filer selling the very same house reports two and a half times the taxable gain a married couple would. That's why a spouse's death changes the picture so much, and why the date of the sale can matter.

See the steps to take before you list

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Rebuilding the paper trail on an old house

After 30 years, the receipts for a new roof or an addition are rarely in one folder. You're expected to back up your basis anyway, and a file pieced together from other records beats a perfect memory.

  1. Start with what you paid. The closing statement from your purchase shows the price, plus costs that may belong in your basis, such as recording fees, transfer taxes and owner's title insurance. Lost yours? Ask the title company or closing attorney who handled the purchase.
  2. Sort improvements from repairs. An addition, a whole new roof or central air adds to your basis. Painting and patching cracks usually don't, unless they were part of a bigger remodel.
  3. Try the city or county. Building permits on file there can help show the work was done.
  4. Dig through old bank records. Canceled checks, credit card statements and contractor statements can fill the gaps, and so can an old appraisal that lists the addition.

That file covers the receipts. It won't tell you whether a spouse's death changed your basis, or which rate the leftover gain would be taxed at.

See the 2026 rates and the 3.8% tax

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