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Capital Gain Exception

I've owned my house for 22 years and used it as my primary resident for 18 years.  For the past 4 years I've rented the house and planning to sell.  Do I qualify for Capital gain exemption?

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4 Replies

Capital Gain Exception


@Shaghdan10 wrote:

I've owned my house for 22 years and used it as my primary resident for 18 years.  For the past 4 years I've rented the house and planning to sell.  Do I qualify for Capital gain exemption?


No (unless some exception is applicable).

 

Otherwise, you must have owned the home and used the home as your principal residence for at least 24 months out of the previous 5 years.

 

See IRS Publication 523: https://www.irs.gov/publications/p523#en_US_2022_publink10008996

Carl
Level 15

Capital Gain Exception

In order to qualify for the capital gains tax exclusion on the sale of your primary residence, you must have lived in the home as your primary residence for at least 730 days (2 years) of the last 1826 days (5 years) you owned it, with the day count starting on the closing date of the sale.  Note that the days you lived in it do not have to be consecutive.

Since you did not live in the house for the minimum required 730 days of the last 1826 days you owned it, you do not qualify for the full exclusion.

However, there are exceptions that "may" qualify you for a partial exclusion. See IRS Publication 523 at https://www.irs.gov/pub/irs-pdf/p523.pdf and start reading on page 6 under "Does Your Home Qualify for Partial Exclusion of Gain".

 

Capital Gain Exception

note that upon sale any deprecation recapture applies before any available amount of the home sale exclusion applies. 

Capital Gain Exception

@Mike9241 made a good point; there will likely be depreciation recapture as a result of the sale.

 

Hopefully, you've been taking depreciation deductions each year the property has been used as a rental. If not, you need to consult with a local tax professional.

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