Downsizing From a $1M+ Broomfield Home in 2026: The $500K Tax-Free Line and What Your Equity Nets
Quick answer: Downsizing from a $1M+ Broomfield home, up to $250,000 of gain ($500,000 married filing jointly) can be tax-free if you owned and lived in it 2 of the last 5 years (IRS Topic 701). In Anthem's tax area 151, a $700,000 home runs an estimated $6,267 a year in property tax. Talk to a CPA.
By Nick Ahrens, Colorado real estate broker license FA.100104470, eXp Realty, LLC
Published October 20, 2026.
How much of a Broomfield home sale can be tax-free when you downsize?
$250,000 of gain, or $500,000 if you're married filing jointly, can be excluded if you owned and lived in the home at least 2 of the 5 years before the sale, per IRS Topic 701. The exclusion is on gain, not on the sale price, so a $1.2 million sale can be fully tax-free while a smaller sale with a large gain may not be.
Here is how IRS Publication 523 frames the pieces:
Gain: your sale price minus your adjusted basis. Basis starts with what you paid and generally goes up with qualifying improvements, so keep those records.
The 2-of-5 tests: 24 months of ownership and 24 months of living in the home during the 5 years before closing. The months don't have to be in a row.
Look-back rule: if you sold another home in the 2 years before this sale and took the exclusion on it, you generally can't take it again yet.
Partial exclusion: if you fall short of the tests, a reduced exclusion exists only for the reasons the IRS lists, such as a change in work, health, or certain unforeseeable events.
Rental or office use: depreciation allowed after May 6, 1997, for a home office or rental use can't be excluded and must be recaptured. Renting it out first also changes the 2-of-5 math (should you sell or rent it out).
A labeled hypothetical, not a client: if a married couple's gain is $600,000 and they meet both tests, the first $500,000 can be excluded and $100,000 is reported as gain. What that $100,000 costs in tax depends on their full return.
This is general information, not tax advice. Talk to a CPA or tax advisor about your situation before you decide. For the step-by-step version of the gain math, see capital gains tax when you sell a Denver-area home.
Sources and as-of dates: IRS Topic 701, Topic 409, Rev. Proc. 2025-32, Topic 559, the IRS NIIT questions and answers, and Publication 523 (2025), all checked October 20, 2026; Colorado DOR Individual Income Tax Guide (January 2026) and DOR's Colorado Capital Gain Subtraction publication (June 2024); Colorado Division of Property Taxation pages on 2026 assessment rates and the senior exemption; Colorado General Assembly SB26-116 page; City and County of Broomfield Mill Levies by District as of December 31, 2025; Redfin Broomfield and Anthem market pages (3 months ending September 2026).
What federal rate applies to gain above the exclusion?
0%, 15% or 20% applies to long-term gain, depending on your taxable income. For 2026 the 0% rate runs up to $98,900 of taxable income for married filing jointly and $49,450 for single filers, the 15% rate runs up to $613,700 and $545,500, and the 20% rate applies above that, per IRS Rev. Proc. 2025-32 (for 2025 returns the 15% limits were $600,050 and $533,400, per IRS Topic 409).
Long-term means more than 1 year of ownership, which nearly every downsizing sale meets.
NIIT: The 3.8% net investment income tax can apply to taxable gain when modified AGI is above $250,000 (married filing jointly) or $200,000 (single); those thresholds aren't indexed for inflation, and gain you exclude on a main home doesn't count (IRS Topic 559). Ask your CPA whether it applies to you. The IRS states the inflation point in its NIIT questions and answers.
One sale can move your bracket. Gain above the exclusion is added to the rest of that year's income, which is why the closing date is a CPA question, not just a moving question.
I don't estimate what you'll owe. Your CPA can, once you have a real price and basis.
Does Colorado tax the gain too?
4.4% is Colorado's flat income tax rate for tax year 2025, and it applies to the gain left after the federal exclusion, per the Colorado DOR Individual Income Tax Guide (January 2026). The guide's table doesn't list a 2026 rate yet.
Excluded gain stays excluded. Colorado starts from federal taxable income, so the gain you excluded federally doesn't show up on your Colorado return.
The capital gain subtraction: Colorado's capital gain subtraction doesn't help a home sale: since tax year 2022 it applies only to farmers who file federal Schedule F and sell Colorado agricultural land acquired from May 9, 1994 through June 3, 2009 and held at least 5 years (Colorado DOR).
Moving out of state first: if you're no longer a Colorado resident at closing, withholding can apply. I cover it in Colorado's 2% withholding for out-of-state sellers.
How do you estimate the equity you'll walk away with?
4 subtractions get you there: sale price, minus selling costs, minus your mortgage payoff, minus any tax on gain above the exclusion. Run them in this order:
Price: start from a broker CMA of same-type sales near you, not an online estimate. Here is what sets the price of a $1 million Anthem home.
Selling costs: build them on a net sheet for your home. I break the lines out in what you net selling a Broomfield home.
Payoff: request a payoff letter from your lender. Your monthly statement balance isn't the payoff figure.
Tax: ask your CPA to estimate any tax on gain above $250,000 or $500,000.
For context only: Redfin shows a $649,191 median sale price for all home types across Broomfield and an $843K median for its Anthem neighborhood area, both for the 3 months ending September 2026 (Redfin Broomfield, Redfin Anthem). A median isn't your home's value.
Want your equity walk run on your actual address?
I'll prepare a broker CMA and a net sheet, and show the property tax for the home you're moving to, so your CPA has real numbers to work from.
Call or text me: 949-230-3625
What happens to Colorado's senior property tax exemption when you downsize?
10 consecutive years of owning and living in the home is what the exemption requires, so it doesn't move with you; the Colorado Division of Property Taxation describes it as 50% of the first $200,000 of actual value for owners 65 or older by January 1.
The 2025-2026 carry-over: a temporary qualified-senior primary residence classification gave seniors who had received the exemption in 2020 or later, then lost it by moving, a similar reduction on their new home. SB26-116, signed June 2, 2026, ends it after property tax year 2026, and the last applications were due July 15, 2026, so it isn't available to someone moving now.
The next home starts its own clock under current law.
I cover eligibility, filing and the timing in Broomfield's senior property tax exemption.
What will property tax look like on the smaller home?
$4,696 a year less is my estimate in Anthem's tax area 151 if you go from a $1.2 million home to a $700,000 home: roughly $10,963 versus $6,267, using 2026 assessment rates and the latest certified mill levies.
The math, shown so you can rerun it:
Rates: 7.05% for Adams 12 district levies and 6.8% for all other local levies on residential property in 2026, with the local rate applied after a $70,000 reduction (10% of the first $700,000 of actual value), per the Division of Property Taxation's assessment rate page and property tax overview.
Levies: tax area 151 (Anthem West metro district) totals 135.511 mills, including 70.956 Adams 12 district mills (general 52.291 plus bond 18.665), per Broomfield's Mill Levies by District as of December 31, 2025. That leaves 64.555 other local mills.
$1.2 million home: 84,600 x 0.070956 = $6,002.88, plus 76,840 x 0.064555 = $4,960.41, for about $10,963.29.
$700,000 home: 49,350 x 0.070956 = $3,501.68, plus 42,840 x 0.064555 = $2,765.54, for about $6,267.22.
Difference: $10,963.29 minus $6,267.22 = $4,696.07.
Caveats that matter:
These are estimates. 2026 levies certify in December, so I used the December 31, 2025 levies.
Not every Anthem address is in tax area 151. Check yours by address on Broomfield's property search.
HOA dues and any separate metro district fees are not in these numbers.
For how mill levies work across the city, see how Broomfield property taxes work.
What should you ask a CPA before you list?
5 questions, before the listing goes live:
What's my adjusted basis, and which improvement records count?
Do we meet the 2-of-5-year tests on the closing date we're targeting?
Is any depreciation from office or rental use going to be recaptured?
Does the gain above the exclusion push us into NIIT or a higher capital gains bracket this year?
Does the timing of the sale change which tax year it lands in?
Choose to list now if:
Your gain fits under $250,000 or $500,000 and you meet both 2-of-5 tests on your target closing date.
The smaller home's property tax and HOA numbers work.
Choose to talk to a CPA before pricing if:
Your gain is likely above the exclusion.
You've ever rented the home or claimed a home office.
You're moving out of state before closing.
Choose to check the senior exemption first if:
You receive it today, because the next home starts its own 10-year clock.
"The number I see owners skip is the property tax on the next home. On a downsize inside Broomfield, I run the tax area for both addresses before we pick a list price." Nick Ahrens, eXp Realty, LLC.
To start, request a broker CMA, or call or text me at 949-230-3625.
What this guide does not cover: how much tax you personally will owe, 1031 exchanges, estate and gifting strategies, or renting the home instead of selling. This is general information, not tax advice. Talk to a CPA or tax advisor.
Frequently Asked Questions
How much profit can I make selling my Broomfield home tax-free?
Up to $250,000 of gain, or $500,000 if married filing jointly, if you owned and lived in the home at least 2 of the 5 years before the sale, per IRS Topic 701. Talk to a CPA or tax advisor about your situation.
Does Colorado tax capital gains on a home sale?
Colorado taxes the gain left after the federal exclusion at its flat income tax rate, 4.4% for tax year 2025, per the Colorado DOR Individual Income Tax Guide. Gain you exclude federally stays excluded.
Can I keep the senior property tax exemption if I buy a smaller home?
Not under current law. The exemption requires 10 consecutive years of owning and living in the home, and the temporary 2025-2026 carry-over classification, which gave a similar reduction on the new home, ends after property tax year 2026 under SB26-116 (signed June 2, 2026). The last applications were due July 15, 2026, so it isn't available to someone moving now.
How much lower will property tax be on a smaller Broomfield home?
In Anthem's tax area 151, my estimate is about $10,963 a year at $1.2 million versus about $6,267 at $700,000, using 2026 assessment rates and the December 31, 2025 mill levies. Check your own tax area by address.
About Nick Ahrens
Nick Ahrens is a Colorado real estate broker (license FA.100104470) with eXp Realty, LLC, specializing in Anthem, Anthem Highlands, and Baseline in Broomfield (80023). He prices homes with a broker-prepared comparative market analysis built from same-type local sales. Call or text 949-230-3625.
