I have been in my home for 3 years and want to sell it in 2018. Does the Tax Cut and Jobs Act of 2017 really means that I won't be able to take the $250,000 home sale exclusion?
Happily, the tax reform legislation didn't change the capital gain exclusion for the sale of one's main home. If you pass three tests--ownership, use, and timing--you can exclude up to $250,000 of gain from the sale ($500,000 if filing a joint return).
If you purchase a new home in 2018 you'll notice a difference in allowable deductions. Mortgage indebtedness is capped at $750,000 (down from $1,000,000), and you can no longer deduct interest for home equity loans. And since the SALT (state and local tax) deduction is limited to $10,000, your real estate (property) taxes may not be fully deductible. However, the increased standard deduction and lower tax rates may make these changes less painful. For details, check out
Didn't the use and timing tests change in the Tax Cut and Jobs Act? That is, it used to be that I would have needed to own the home 2 out of 5 years as well as live in it 2 out of 5 years, but now the new rule is 5 out of 8 years. Isn't this correct?
Yikes! If that's true, you couldn't sell a converted rental unless you lived in it for five years. Well, not without paying a bunch of taxes. Not so good for those of us with rental properties.