Deductions & credits

If you do not meet any of the qualifications for a reduced home sale exclusion, the capital gains rates are 0%, 15%, or 20% depending on your other income.

See the following from the IRS regarding the sale of a home:

However, if you don’t qualify for the full exclusion, you may qualify for a reduced exclusion if one from any from a number of listed unforeseen occurred.

The reduced exclusion percentage is calculated by dividing the number of days that you lived in the home divided by the number of days in two years. That percentage is multiplied by the full exclusion amount of 250,000 dollars (or 500,000 dollars for married joint filers).

The listed unforeseen events are as follows:

Work-related move.   You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold:

• You took or were transferred to a new job in a work location at least 50 miles farther from home than your old work location.
• You had no previous work location and you began a new job at least 50 miles from home.
• Either of the above is true of your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence.

Health-related move.   You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold.

• You moved to obtain, provide, or facilitate diagnosis, cure, mitigation, or treatment of disease, illness, or injury for yourself or a family member.
• You moved to obtain or provide medical or personal care for a family member suffering from a disease, illness, or injury.
• Family includes:
• Parent, grandparent, stepmother, stepfather;
• Child, grandchild, stepchild, adopted child, eligible foster child;
• Brother, sister, stepbrother, stepsister, half-brother, half-sister;
• Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law;
• Uncle, aunt, nephew, niece, or cousin.
• A doctor recommended a change in residence for you because you were experiencing a health problem.
• The above is true of your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence.

Unforeseeable events.   You meet the standard requirements if any of the following happened 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;
3. Gave birth to two or more children from the same pregnancy;

1. Became eligible for unemployment compensation;

1. 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).