<p>Profits of selling a home, if under the Federal capital gains threshold of $500K for a married couple, are not treated as income in a given tax year. </p>
<p>(cross-posted with menloparkmom)</p>
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<p>You’d owe taxes on the $300K, say a marginal increase of $30K to your tax bill in the tax year of the winnings. This would also increase your EFC by approximately $150K.</p>
<p>If you sell your $400K home and put the gains (assuming your current home has no mortgage) into the new house, adding in the net $270K of your winnings, you’d be putting $670K down on an $800K home.</p>
<p>So the net gain of your windfall is a higher tax bill, a higher EFC, and a bigger house with (presumably) a bigger mortgage than you have now.</p>