Will we owe capital gains tax when we sell our house?
Most homeowners don't. Federal law excludes up to $250,000 of gain for a single filer, and $500,000 for a married couple. That applies to a primary residence you've owned and lived in for two of the last five years. Minnesota generally follows the same treatment. The gain is measured from what you paid plus qualifying improvements, not from zero. The taxable number is usually smaller than people fear.
Where it gets real: decades in one house. Twin Cities households who bought in the 80s or 90s can often clear the exclusion entirely. That's especially true after a spouse has died — though the timing rules around that are specific and deserve professional eyes. The unsung move: dig out records of every improvement you've made. The roof, the kitchen, the addition — each one raises your basis and shrinks the taxable gain.
I'm not your CPA, and this isn't tax advice. It's the list of questions to bring to your CPA: our basis, our exclusion, our timing. I bring the sale numbers; they bring the return.
I wrote this answer, and I stand behind it. I'm Chris Deutsch, a Minneapolis Realtor (MN #20382264). Twenty-five years of walking these neighborhoods, checking basements, and sitting across kitchen tables from people making exactly this call. I re-check every answer and date it — this one was last verified .
If your situation is more specific than the market, that's the one worth talking through. Email me at chris@lakesarearealty.com.