For homeowners in New Hanover, Pender, and Brunswick counties, selling a home often comes with a nice profit. Whether you bought in Wilmington before the 2020 boom or held a beachfront property in Oak Island for decades, your equity has likely grown significantly.

But with profit comes the question every seller asks: "How much of this do I have to give to the IRS?"

The good news is that for most primary residence sellers, the tax bite is $0—if you know the rules. Here is your 2025 guide to keeping your hard-earned equity in your pocket.

1. The "Golden Ticket": Section 121 Exclusion

The IRS gives homeowners a massive tax break known as the Section 121 Exclusion. As long as you meet specific requirements, you can walk away with hundreds of thousands of dollars in profit tax-free.

The 2025 Limits:

• Single Filers: You can exclude up to $250,000 of capital gains.
• Married Filing Jointly: You can exclude up to $500,000 of capital gains.

The Catch (The 2-out-of-5 Rule): To qualify, you must meet both the Ownership Test and the Use Test. You must have owned the home and lived in it as your primary residence for at least 2 of the last 5 years leading up to the sale.

Note: The 2 years do not need to be consecutive. If you lived in your Leland home for 2022 and 2023, rented it out in 2024, and sold it in 2025, you still qualify.

2. The North Carolina Reality Check (2025 Update)

While the federal government gives you a break, the state of North Carolina is a bit stricter.

In NC, capital gains are treated as ordinary income. There is no special lower "capital gains tax rate" at the state level.

The 2025 Rate: North Carolina has a flat income tax rate of 4.25%.

What this means: If your gain exceeds the federal exclusion limit (e.g., you are single and made $300,000 profit), the extra $50,000 is subject to federal capital gains tax plus the 4.25% NC state tax.

3. Lowering Your Bill: The Power of "Cost Basis"

If you think your profit might exceed the $250k/$500k limits, your best defense is increasing your Cost Basis.

Your profit isn't just Sale Price minus Purchase Price. It is Sale Price minus Adjusted Cost Basis. The higher your basis, the lower your taxable profit.

What Counts as an Improvement? You cannot deduct repairs (like painting a room or fixing a leaky faucet). You can deduct capital improvements that add value and prolong the home's life. In our coastal market, these high-value upgrades are your best friends:

• Coastal Protection: Installing storm shutters, impact windows, or a fortified roof.
• Waterfront Upgrades: Building a dock, bulkhead, or boat lift.
• Additions: Adding a FROG (Finished Room Over Garage), sunroom, or deck.
• Systems: New HVAC units, replacing septic systems, or paving a gravel driveway.

Pro Tip: Did you pay for a new roof in 2018? Dig up that receipt. Every dollar you spent then is a dollar you don't pay taxes on now.

4. Exceptions to the Rule

Life happens. If you have to sell before hitting the 2-year mark, you might not lose everything. The IRS allows for a Partial Exclusion if the move is due to:

• Work: Your job moved more than 50 miles away.
• Health: You moved to obtain or provide medical care.
• Unforeseen Circumstances: Divorce, death of a spouse, or natural disaster (like flood damage).

The Bottom Line

Taxes shouldn't be a surprise at the closing table. A little preparation now—gathering receipts for that boat lift or verifying your residency dates—can save you thousands later.

At Aspyre Realty Group, we aren't CPAs, but we are experts in maximizing your net proceeds. We can help you identify which of your past home improvements might count toward your basis and connect you with top local tax professionals to finalize your strategy.