Do I need to reinvest my proceeds to avoid taxes?
When you sell your old home you do not need to reinvest all, or any, of the cash received into a new home in order to avoid taxes. Since 1997, Uncle Sam doesn't care how you reinvest the proceeds (savings, vacation, car purchase, bill consolidation, etc). Any gains up to $500,000 for married couples and up to $250,000 for singles are tax free, as long as:
- Youre selling a principal residence.
- Youve lived in the house 2 of the last 5 years.
- You havent sold your previous house within 24 months.