I am going to limit my answer to the federal government. At the time of sale, the seller is allowed to deduct all the expenses related to the sale including those expenses getting the house ready for sale. This becomes the adjusted selling price. You then have to determine your cost basis which consists of your original purchase price plus some of your closing cost and to this you would add any capital improvements made to your home for all those years that you held the property. Assuming you have a gain, you're entitled to a $250,000 exemption over and above your cost basis before taxes are imposed. If you're married and if the house was in joint name at the time of sale, each of you have a $250,000 exemption from before the capital gains tax would be imposed. If the state in which you reside has an income tax, most states don't recognize the capital gain exclusion's allowed by the federal government so you may have to check into this on your own. Hope this helps and good luck
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