capital gain exemption on home sales

[miernikcx]

We had a primary residence since 2010, and rented it out since 2022. Now I am considering selling it. I know the tax law says if used as primary residence for 2 years out of the past 5 years, then the capital gain tax exemption is up to $500k for married couple. In terms of timing, I wonder when exactly the property is considered as a rental.

In my case, we moved out to a 2-beds rental in June 2022 as we had a new born. My mom visited us at that time. She lived in our old apartment while we had a nanny with us. In Aug 2022, we listed the old apartment for rent, and rented it out in Nov 2022. In order to qualify for the tax exemption, by which date should I close the sale? June 2025 or Aug 2025 or Nov 2025? 

Thanks in advance for the help!

[MaryK4 · Accepted solution]

You will want to close the sale before June 2025, since the lookback will be to the day you stopped using the apartment as your home.

[miernikcx]

Thank you!

When I do tax return next year, what kind of evidence or document do I need to provide that I actually used the apartment as home until June 2025? 

[MaryK4]

What you need to do is create a five year calendar starting with the date of sale going back.  (so it will be 60 months)- you need to be able to put a check in at least 24 months that you lived there.  If they ask, it is usually things like utility bills, car insurance (because your car is supposed to be at your home), bank/credit card statements, work paychecks if they show the address. @miernikcx 

[miernikcx]

Got it. Thank you!