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Tax break for selling land next to your house

You probably know that if you make a profit when you sell your house, you can usually avoid paying capital gains tax. In most cases, you can avoid the tax on profits of up to $250,000 (or $500,000 for a married couple).

But did you know that if you sell your house in one transaction and a vacant parcel of land next to your house in a separate transaction, you can also get a tax break?

In many cases, you can combine the two sales and treat them as a single sale subject to the $250,000 or $500,000 exclusion.

That’s true if you sell the adjacent parcel within two years before or after you sell your house, and if the parcel was originally part of your residence and wasn’t used for a separate business or rental purpose.

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