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sgarrison25
New Member

Will I have to pay capital gains tax on a gifted property when selling, if it’s been our primary residence for 5 yrs (paid rent) but wasn’t gifted to us until 1 year ago?

 
1 Reply
MichaelMc
New Member

Will I have to pay capital gains tax on a gifted property when selling, if it’s been our primary residence for 5 yrs (paid rent) but wasn’t gifted to us until 1 year ago?

The Tax Cuts and Jobs Act of 2017 makes many changes to the treatment of capital gains and losses, but capital gains from the sale of your principal residence can still be excluded.

To qualify, you must have owned your home and used it as your main residence for at least two years in the five-year period before you sell it. You also must not have excluded another home from capital gains in the two-year period before the home sale. If you meet those requirements, you can exclude up to $250,000 in gains from a home sale if you’re single and up to $500,000 if you’re married filing jointly.

If you sell a home that was not a primary residence or that does not meet the above requirements, then you would pay capital gains on that sale.

Please note that the rule above actually is two separate requirements. During the five years before you sell the house, you must have:
  1. Owned the home for at least two years, and
  2. Lived in the home, as your principal residence, for at least two years.

The ownership test must be met by at least one spouse, if Married Filing Jointly. The residence test must be met by both spouses.

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