Legal Question in Tax Law in Illinois

Depends on several factors

If you have lived there 2 of the last 5 years $250,000.00 is free from tax. (500k) for a couple.

Otherwise you pay capital gains tax on the difference between your costs and the sales price.

Just to clarify what the previous answer says, the amount you sold the house for is not your profit. The profit (gain) is the difference between the sales price and your "basis." Your basis is the amount you paid for the house plus any adjustments, such as amounts you paid for capital improvements to the home (but not repairs or replacements).

For example, if you bought the house for $200,000 and added a garage for $15,000, your basis would be $215,000. If you sold the house for $315,000, your gain would be $100,000 (not $315,000). The amount of the gain would not change whether you had a $200,000 mortgage or none at all.

As the previous answer also mentioned, if you owned the home for at least 2 years and you lived in it for at least 2 of the last 5 years, you may exclude up to $250,000 of the gain ($500,000 on a joint return).

If you are unsure of these rules, I suggest you read IRS Publication 523 "Selling Your Home" which is available online at http://www.irs.gov/pub/irs-pdf/p523.pdf