Financial Strategy · FAQ
Do I have to report the sale if my gain is below the exclusion limit?
Last updated: July 2026
Quick Answer
Yes — you must still report the sale on your federal return using Form 8949 and Schedule D, even if the gain is fully excluded. Your tax preparer will need the closing disclosure and documentation of your cost basis.
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What if I inherited the home?
Inherited properties receive a stepped-up cost basis to the fair market value at the time of the original owner's death — which can significantly reduce or eliminate capital gains on a subsequent sale. This is a major planning opportunity for heirs.
Read answerCan I exclude gains if I recently used the exclusion on another home?
Yes, as long as two years have passed since the previous exclusion was claimed. There is no lifetime limit on the number of times you may use the primary residence exclusion.
Read answerIs Washington's capital gains tax the same as the federal rate?
No. Washington's capital gains tax applies at a flat 7% rate on gains above the annual threshold — but it expressly excludes gains on real property used as a primary residence, which are already covered by the federal exclusion framework. Most Seattle homeowners selling a primary residence will not owe Washington capital gains tax.
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