Although this has been discussed and talked about since the tax law changed in 1997 many homeowners and real estate agents are still not aware that in most cases there will not be any state or federal taxes due on your gain when selling your primary residence here in New Jersey.
Prior to the the law being changed, if you sold your primary residence and had a profit you could avoid paying taxes due on the gain only if you purchased a new residence of equal or greater value. If you were 55 or older you could take a once in a lifetime $125,000 exclusion on your profits if you didn't purchase a new residence.
THIS IS NOT THE CASE ANYMORE! If a single person sells their primary residence they will not pay state of federal taxes on the 1st $250,000 in gains. Married couples each get to exclude up to $250,000 each so the 1st $500,000 in gains is tax free when selling their home. There are no requirements to purchase a new primary residence. The only requirement is the that you lived in the property as your primary residence for 2 out of the past 5 years (see use test IRS).
Another great part of the law is you can do this more then once. Buy a home live in it for more then 2 years out of 5 years, sell it for a gain and take the exclusion. Buy another home, live in that home for 2 years out of 5 years, sell the home and exclude the gain. You can keep doing this under the current law. Don't let the 2 out of 5 year rule be confusing. It only applies to a home you purchased and owned for 2 years or more and didn't live in for the entire time. If you buy a home as your primary residence and occupy it for at least 2 years then sell the home you can exclude the gain.
So if you are planning on selling your primary residence , unless your gain is greater then the exclusions there will be no taxes due on the gain. So let's get moving while the law is still in your favor!