primary residence for less than 2 year and then rented capital gain

[caperomie]

Hi there, i have a somewhat tricky question that is baffling me and i am not able to find the answer, will try to explain here.

current date is 9/20/2021.

i have a home purchased on October 2020 which i use as a primary residence, i am also buying another home in same city which will be ready on Feb 2022 , builder is asking me to occupy the new house as primary residence for two years. here is my dates:

1st house purchase date = 10/2020

lived in 1st house until = 1/2022 (15 months)

moved to second house = 2/2022

lived in second house until = 2/2024

1st house rented period = 2/2022 to 2/2024 (2 years)

moved back to 1st house = 3/2024

 proposed sold date1st house = 1/2025

in above scenario i have only 50% gain as qualified period, please correct me if i am wrong since i didnt live in my 1st house for 2 years and rented.

[Critter-3]

Second home ... if you live in it  for 2+ years then you can take the personal residence exclusion

First home ... if you live in it for 2 out of the last 5 years working back from the sale date then you can also take the personal residence exclusion if you wait 2 years from the second home's sale date.  HOWEVER  you will need to recapture the depreciation you MUST take on the home while it was a rental.   Seek local professional guidance if you still have questions on this matter.  

[AmeliesUncle]

---

@caperomie wrote:

Hi there, i have a somewhat tricky question that is baffling me and i am not able to find the answer, will try to explain here.

current date is 9/20/2021.

i have a home purchased on October 2020 which i use as a primary residence, i am also buying another home in same city which will be ready on Feb 2022 , builder is asking me to occupy the new house as primary residence for two years. here is my dates:

1st house purchase date = 10/2020

lived in 1st house until = 1/2022 (15 months)

moved back to 1st house = 3/2024

 proposed sold date1st house = 1/2025

---

If the first home was you principal residence for at least 730 days during the 5-year period before it was sold, it will qualify for AN exclusion.  But in your situation, you only qualify for a prorated exclusion.  As you said, if it was your main home for 24 months out of a total ownership period of 48 months, you will only qualify to exclude 50% of the gain due to the "nonqualified use" during the time you did not live there (not including any gain due to depreciation, which is also taxed).