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Great question! You'll be taxed on the "capital gain," which is gross proceeds minus your basis. "Basis" just means sunk cost in the home (for example, the original purchase price or repairs).
If your mom gifted you the home in 2000, your basis in the home is whatever your mom's basis was right before giving it to you (split three ways). The substantial renovations you made can be included in your basis as well.
You can also subtract any closing costs associated with the sale, such as commissions or title fees.
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Sarah is a staff writer at Keeper Tax and has her Enrolled Agent license with the IRS. Her work has been featured in Business Insider, Money Under 30, Best Life, GOBankingRates, and Shopify. She has nearly a decade of public accounting experience, and has worked with clients in a wide range of industries, including oil and gas, manufacturing, real estate, wholesale and retail, finance, and ecommerce. Sarah has extensive experience offering strategic tax planning at the state and federal level. During her time in industry, she handled tax returns for C Corps, S corps, partnerships, nonprofits, and sole proprietorships. Sarah is a member of the National Association of Enrolled Agents (NAEA) and maintains her continuing education requirements by completing over 30 hours of tax training every year. In her spare time, she is a devoted cat mom and enjoys hiking, baking, and overwatering her houseplants.
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