Capital gains, I am so confused

[greenmimama]

We bought a foreclosure to live in, we had to finish it because the previous owners had pretty much stripped it, at the end of our 2 years of owning it we would like to put it up for sale and we expect to make a decent amount of money on it.

What exactly are capital gains? Is it only what we have gained? as in what we put into the home, anything on top of that? is what is called capital gains?

Our goal in buying this home was to sell it and then with the money we would profit from it, plus all that we put into it our selves in sweat equity buy a new house with cash.

My question is, we have put about $330k into the home, purchase price, and cash combined

We hope to sell it for $550 so minus closing costs and realtor fees we want to walk away with a little over $500, we still owe $212 So what does that mean with our capital gains and do we have to spend all of the gains on a new house within 90 days?

Thanks so much if you need more info just let me know

[jpdcpajd]

Assuming you are in the US.  If you lived in it as your principle residence for two years out of the last five then you can exclude up to 500k for a married couple filing jointly (250k otherwise).  There is no need to buy a new house within any timeframe.

[greenmimama]

We are in the US and we live here, thank you so much, this gives me hope :)

[arebelspy]

Capital repairs raise your cost basis, so you don't have to pay taxes on that part, as it's not gains. Document everything, and consult with a CPA.

jpd's advice is spot on as well, but if you're going to be above that limit, you'll definitely want to show the raised cost basis, especially because any depreciation in the meantime will lower your cost basis.