I am under the understanding that the capital gains exemption on a primary residence applies to gains only and not the total sale price of the house however I am in the process of signing paperwork for the sale of my home and one of the pages is concerning.
I am married and my wife and I will be selling our home for around $640k. We should be getting a little over $260k back after expenses and paying off the existing mortgage. My understanding is this should be completely tax free as it's under the $500k capital gains exemption for married couples.
One of the pages in the package I signed asked the following question(s) (true or false):
At least one of the following three statement applies:
The sale or exchange is of the entire residence for $250,000 or less.
I am married, the sale or exchange is the entire residence for $500,000.00 or less, and the gain on the sale or exchange on the entire residence is $250,000.00 or less.
I am married, the sale or exchange is of the entire residence for $500,000 or less, and (a) I intend to file a joint return for the year of the sale or exchange, (b) my spouse also used the residence as his or her principal residence for periods aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange of the residence, and (c) my spouse also has not sold or exchanged another principal residence during the 2-year period ending on the date of the sale or exchange of the residence (not taking into account any sale or exchange before May 7, 1997).
I answered false to this but does this mean I'll be paying capital gains tax? Should I have answered true? Has the law changed? Or am I just reading too much into this because it doesn't actually say anything about taxes?