Question: I read somewhere that in California If you are a senior and want to downsize by selling your house to move to a condo, you don't pay capital gains. Is it so?

Answer: When you sell a personal residence that you've lived in for at least two of the last five years in any state, $250,000 of gain is excludable from taxable income if you are single or $500,000 is excludable for a married couple, says Brooke Salvini, CPA/PFS, member of the American Institute of CPAs' Personal Financial Planning Executive Committee.

According to Salvini, if the gain on the sale of your home is more than these exclusion amounts, then you will pay capital gains tax on the amount of excess gain. The capital gains tax rate can be anywhere between 0% to 23.8% and will depend on your overall taxable income. Salvini says California does not have a separate capital gains tax rate and the gain in excess of the exclusion will be taxed at your ordinary California income tax rate.

"Something else you may have heard about in relation to seniors downsizing homes in California is Prop. 60," Salvini says, which provides for a one-time opportunity for those over age 55 to carryover a low property tax base from the home they sell to a new home. "The home you buy has to be of equal or lesser value compared to the home you sell, located within the same county or counties that have reciprocal arrangements, and you have to buy or build it within two years of selling your previous home," she explains. This can be a big and important savings for seniors managing a fixed budget.

Got questions about the new tax law, Social Security, Medicare, retirement, investments, or money in general? Want to be considered for a Money Makeover? Email Robert.Powell@TheStreet.com. Kim McSheridan assisted with this report.

Question: I read somewhere that in California If you are a senior and want to downsize by selling your house to move to a condo, you don't pay capital gains. Is it so?

Answer: When you sell a personal residence that you've lived in for at least two of the last five years in any state, $250,000 of gain is excludable from taxable income if you are single or $500,000 is excludable for a married couple, says Brooke Salvini, CPA/PFS, member of the American Institute of CPAs' Personal Financial Planning Executive Committee.

Member Exclusive

Get Access to Our Exclusive Content