A tool designed to estimate the tax liability incurred from the profit realized upon the sale of a primary residence. It requires inputting data such as the original purchase price, costs of improvements made over the ownership period, selling price, and allowable selling expenses. The resultant calculation provides an approximation of the taxable capital gain and the potential tax owed to federal, and sometimes state, authorities.
Understanding potential tax obligations before selling real estate is crucial for financial planning. Accurate estimation allows homeowners to anticipate tax payments, make informed decisions regarding pricing and timing of the sale, and potentially explore strategies to minimize tax exposure. Historically, individuals relied on manual calculations or professional advice. The development of these automated tools simplifies this process, providing accessible and readily available estimates.