Hello!
This is my first post into the community. I have a unique situation where I owned and lived in two homes for 2 out of the last 5 years, and will be selling both of the homes this year. Here are the property details:
Home 1: Lived in 4.5 years ago - 2 years ago (2.5 total years), then converted into a rental property after we moved 2 years ago
Home 2: Lived in 2 years ago - last month (2 total years) and listing for sale
Here's the question: Can I sell both properties and not pay capital gains on both of them?
Thanks!
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@proudapron wrote:Here's the question: Can I sell both properties and not pay capital gains on both of them?
Welcome to the Community.
First of all, it is 2 years out of the last 5 years leading up to the date of the closing, just so that is clear in the event the first house does not close according to your timetable for the sale.
More importantly, though, is the rule that you can use the exclusion only once during a 2-year period. Treas. Reg. §1.121-2(b)
So you clearly could not take the Section 121 exclusion on both houses unless they sold more than 2 years apart.
See https://www.irs.gov/publications/p523#en_US_2018_publink10008962
@proudapron wrote:
Right now we have a lot of equity in house 1 and I'm not sure if we should sell it if we're guaranteed to get hit with capital gains.
I agree with @NCperson, specifically, you should wait until the houses actually sell and then make a decision.
Regardless, I believe you meant you have a lot of unrealized gain in House 1 since the amount of equity is irrelevant to the calculation of capital gain. In that event, you are pushing the envelope with respect to the 2 out of 5 rule on that property while you have quite a bit of time left on House 2. Therefore, you might want to use your exclusion on that one so it is not essentially lost.
No problem @NCperson - we can't tell if someone else is responding to a post here like we can on the other TurboTax forum.
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