Sell two houses in the same year

[wewe5dfbb]

My wife and I purchased our own house separately before we get married. I work in VA and she works in MD. My driver license is using my VA address and she is using her MD address. Mail were sent to separate addresses too. We all live in our own houses for more than two years. So if we want to sell both houses in the same year and move together. Can we get tax exemption for both houses if there are gains? From my point of view, both houses are our primary residence. But how should I fill the tax form? Do married filing separately?

[Opus 17 · Accepted solution]

You don't need to file married separately, however, each of you only gets the $250,000 exclusion on their original home.  Or, if you have a house with a larger gain than that, you could combine your exclusions and use a $500,000 exclusion for one house and then pay the gains tax on the other.

[wewe5dfbb]

Thank You!

[Bees]

you can't get the $500k on one property. The rules say both people must have lived in the property for two years.
see
Each of you would likely only get the single personal section 121 exemption. See
http://www.americanbar.org/newsletter/publications/gp_solo_magazine_home/gp_solo_magazine_index/mari...  Married taxpayers qualify for the $500,000 exclusion under the following conditions:

The parties file a joint return for the year of sale.
At least one spouse satisfies the two-out-of-five-years ownership requirement.
Both spouses satisfy the two-out-of-five-years use requirement.
Neither spouse is ineligible because he or she used the exclusion in conjunction with a previous sale within two years of the date of the current sale
example As for newlyweds, assume A and B plan to buy a new home together and sell the homes each lived in prior to the marriage. Neither party satisfies the ownership and use requirements with respect to the other’s premarital home. A and B have gains of $200,000 and $300,000, respectively, incident to the sales. Whether they file jointly or individually, A’s $200,000 will be fully excluded by the $250,000 exclusion, whereas $50,000 of B’s gain—the excess over the $250,000—will be subject to tax. B may not use A’s unused exclusion on B’s gain in excess of the $250,000 limit.

[16mcclung]

I am in the same situation. I owned my own house and my husband owned his own house prior to us getting married. We both qualify for the 2 year of the past five in our own homes. We are wanting to buy one home together. My house is up for sale and currently under contract. We probably won't be selling his until next year (being we are already almost at November). Would I be able to get the exclusion and he get his on his sale of house next year? Instead of doing the 500 for married? Neither properties would have gains near the 250 mark in either case. PLEASE let me know asap.

[TomD8]

@16mcclung  -- In  your situation the exclusion is figured separately for each spouse as if you were not married. This means you can each qualify for up to a $250,000 exclusion.

[Carl]

you could combine your exclusions and use a $500,000 exclusion for one house and then pay the gains tax on the other.

No, you can't combine your exclusion for one house. You must have *BOTH* lived in the house for at least 2 of the last 5 years you owned it. Since each of you did not have an ownership stake in the other's house, that nixes the combining stuff right there. You each get a $250,000 exclusion on the house you own. That's it.

Also, don't file separate. That just makes no sense tax-wise. (unless you like paying more taxes of course.)

[Bees]

I agree from what I read in the IRS publication  but saw some other links  on the subject.

 Bogleheads https://www.bogleheads.org/forum/viewtopic.php?t=174630

and an older Turbotax post https://ttlc.intuit.com/community/taxes/discussion/can-we-sell-two-houses-in-one-year-and-meet-requi... @MichaelDC

 Make sure your closing agent knows you are selling the property as a primary residence sale so they do not issue a 1099-S.

[Purpleribbon]

If I sell two house the same year, can I claim the $250,000 exception for one, and file 1031 for another one ? 
Thanks 

[Critter-3]

@Purpleribbon     This thread was talking about personal residences ...  you cannot do a 1031 exchange on a personal residence.

However if you sell both a personal residence  and a separate business property in the same tax year you can use the exclusion on the personal residence and the 1031 exchange on the business property.   Make sure you understand all the rules that come with a 1031 exchange before you sell anything ... failure to comply exactly with the regulation will void the exchange.