Can you use the proceeds from selling one house to buy another without paying capital gains tax?

Yes, you can use the proceeds from selling one house to buy another without paying capital gains tax in many cases, thanks to the Section 121 Exclusion. Here's how it works:

The Section 121 Exclusion allows you to exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) from the sale of your primary residence[1][3].
To qualify, you must have owned and used the home as your primary residence for at least 2 out of the 5 years preceding the sale[1][4].
You can use this exclusion once every 2 years[1].

If your capital gains from the sale fall within these limits, you can use the entire proceeds to buy another house without paying capital gains tax. If your gains exceed the exclusion amount, you'll only owe taxes on the portion above the limit[1].

It's important to note that:

This exclusion applies specifically to primary residences, not investment properties or vacation homes[3].
You don't need to buy another home to claim this exclusion; you can use the proceeds for any purpose[4].
If you're selling an investment property, you might be able to use a 1031 like-kind exchange to defer capital gains taxes, but this has different rules and doesn't apply to primary residences[2].

Always consult with a tax professional for advice tailored to your specific situation, as tax laws can be complex and subject to change.

Citations: [1] https://www.kiplinger.com/taxes/capital-gains-home-sale-exclusion [2] https://www.rocketmortgage.com/learn/can-you-avoid-capital-gains-tax-by-buying-another-house [3] https://smartasset.com/taxes/can-you-avoid-capital-gains-tax-by-buying-another-home [4] https://smartasset.com/taxes/section-121-exclusion [6] https://www.investopedia.com/principal-residence-exclusion-8683281 [7] https://www.freshbooks.com/en-ca/hub/taxes/how-to-avoid-capital-gains-tax-on-property [8] https://www.1031exchange.com/section-121/