How do I claim the US primary residence exemption?
The United States currently has a primary residence tax exemption that allows you to exclude up to $250,000 (or $500,000 for married couples filing jointly) of capital gains from income when selling your primary home, provided you meet certain criteria such as the ownership test, use test, and frequency limit. ProjectionLab is set up to show this exemption on your plan.
Step 1: Add Your House
Make sure you have added your house in Add Real Assets before continuing. Once that’s done, go back to your Plan.
Step 2: Configure Usage and Sale
In your Plan, scroll down to Real Assets and click on your House. Expand all sections by clicking the up/down arrows, then:
- Scroll to Usage and choose Primary Residence.
- Scroll to Sale and enter a date for selling your house (for example, Jan 2032).
- Click Save.
Note
This example assumes you are single and will use the $250,000 exemption. The $250,000 is the maximum – the actual amount excluded is limited by your capital gains. For example, if your capital gains on the home are $100,000, then $100,000 – not $250,000 – is excluded from taxes.
Step 3: View the Deduction on Your Plan
From your main Plan graph, look for the dropdown below Plan that defaults to Net Worth. Click it and scroll to Taxable Income. Your graph will now show the Primary Residence Deduction of $250,000 in 2032 when Display Options > Inflation is set to Actual Currency.
Step 4: Drill Into the Details
Click the bar for 2032 to open more detail on the right side of your screen. Click Taxable Income to see your income and total deductions. Click Deductions to see each deduction itemized, including the Primary Residence Deduction, Standard Deduction, Itemized Deduction Gap, and more.
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