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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]You would be taxed at long-term capital gains rate for the amount you make (difference between purchase and sales price) above and beyond the $250K per person exclusion assuming you have continued to live there.

http://www.irs.gov/taxtopics/tc701.html

You don't need to "protect the money". Taxes pay for schools, hospitals etc. If you are making a couple of million you can afford a few hundred thousand in taxes.[/quote]

issue is after exemption, let's say there is 1M in play.  Are we taxed at personal income bracket (40% roughly) which is 400K or capital gains rate (15%??)  much different scenarios.   [/quote]

Who knows what tax laws will be like in 10 years? [b]If you really want to count your potential real estate gains in your retirement figures I would be super conservative. [/b]I don't think I'd count more than half that equity to account for rising tax rates and unforeseen costs.[/quote]

That's the key point.  The housing market, interest rates, tax laws, etc. are all volatile.  I'd count the money, but do four scenarios, starting with worst-case (no equity at all) and ending with sale for current (conservatively estimated) value, with two in between.  Any increase in value is great, but is just gravy and shouldn't be counted on.  [/quote]

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