Deductions & credits

Maybe.  The IRS defines an "unforeseen event" as follows:

You meet the standard requirements if any of the following events occurred during the time you owned and lived in the home you sold. 

• Your home was destroyed or condemned. 

• Your home suffered a casualty loss because of a natural or man-made disaster or an act of terrorism. (It doesn’t matter whether the loss is deductible on your tax return.) 

• You, your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence: 

1. Died; 

2. Became divorced or legally separated, or were issued a separate decree to pay maintenance (support) to the other spouse; 

3. Gave birth to two or more children from the same pregnancy; 

4. Became eligible for unemployment compensation;

5. Became unable, because of a change in employment status, to pay basic living expenses for the household (including expenses for food, clothing, housing, medication, transportation, taxes, court-ordered payments, and expenses reasonably necessary for making an income). 

6. An event is determined to be an unforeseeable event in IRS published guidance

In addition, there may be other facts and circumstances to consider.

Even if your situation doesn’t match any of the standard requirements described above, you still may qualify for an exception. You may qualify if you can demonstrate the primary reason for sale, based on facts and circumstances, is work related, health related, or unforeseeable. Important factors are: 

• The situation causing the sale arose during the time you owned and used your property as your residence

• You sold your home not long after the situation arose.

• You couldn’t have reasonably anticipated the situation when you bought the home. 

• You began to experience significant financial difficulty maintaining the home.

• The home became significantly less suitable as a main home for you and your family for a specific reason.

IRS Publication 523: Selling Your Home  (pages 6 & 7)

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