"A capital gain is an increase in the value of any capital asset that you own," says a USAA article on the subject. A good example? Real estate. Stocks, bonds, personal property and collectibles are also capital assets, and when you sell any of them for a higher price than you originally purchased them, you have realized a capital gain, and you will likely have to pay a tax on that gain.



But let's return to real estate. If you bought your personal residence several years ago for, say, $450,000 and you sell it for $650,000, there's an obvious $200,000 gain, much of which you can simply put in your pocket as profit from the sale. And capital gains from the sale of personal residences, as you probably know, get very special treatment.



If you file jointly as a married couple, you can exempt up to $500,000 in capital gains from taxation in the sale of a personal residence in most cases. That means your $200,000 profit (less the costs of selling) simply won't be taxed. Thus, if you would normally be taxed in the 25% bracket on capital gains, you'll save roughly $50,000.



This is one of the stunning ways in which a personal residence can serve you financially, and one of the mains reasons that people look to their homes as one of the foundations of their financial lives and bedrocks of their savings programs. For more information call Beth at 425-450-5208.