Q. Is there a limit like 2,4, 6 months for me to close on my new home after I sold my current home?
A. No.
Q. If I sell my home tomorrow for 850,000 that I bought originally for 175,000 8 years ago. I netted something like a 580,000 gain. Does the IRS give you unlimited time to reinvest?
A. Simple answer: Yes. More accurately, there is no requirement to reinvest. The new law allows you to not pay tax on the first $500,000 (married jointly) of gain, regardless of what you do with the money. You must simply have owned and lived in the home for a minimum of 2 years out of the 5 years prior to the sale.
Q. What’s preventing me from renting and sitting on this gain for a couple of yrs.
A. You have to report $80,000 of the gain, the year you sell the property. The first $500,000 is tax free.
Q. Got to be sometime the IRS will come a knocking?
A. Yes, the year you sell it, whether or not you bought a new home. You report the entire $580,000 gain; then claim a $500,000 adjustment (home sale exclusion), for a net reportable gain of $80,000.
