topic My husband & I sold our home in 2020. We are currently building a new home and will use the proceeds on the new home. We file separately. What's the tax implication? in Deductions & credits

My husband & I sold our home in 2020. We are currently building a new home and will use the proceeds on the new home. We file separately. What's the tax implication?

vandusseldorpka — Tue, 02 Mar 2021 15:58:08 GMT

We do not file joint return. What are the rules on rolling the profit from one house over to a new house being built?

Re: My husband & I sold our home in 2020. We are currently building a new home and will use the proceeds on the new home. We file separately. What's the tax implication?

Opus 17 — Tue, 02 Mar 2021 16:19:35 GMT

The rule on postponing taxable gain was eliminated at least 20 years ago, possibly 1997.

The current rule is that you are allowed to exclude up to $250,000 of the gain from the sale of your primary residence, or up to $500,000 if you are married filing jointly, as long as you lived in the home for at least two of the past five years, and owned it for at least two years. Any gain over those limits is taxable long-term capital gains.

If the sale of your home in 2020 resulted in a taxable capital gain, you report it in 2020. It is completely separate from whatever you do with the proceeds.

If you have postponed gain from a previous home that was rolled into your current home that you bought before 1997, that Hass to get taken into account when reporting the sale of your most recent home. You must reduce the purchase price of your home by the amount of any postponed gain, before you calculate whether or not your taxable gain is more than the exclusion limit.

Re: My husband & I sold our home in 2020. We are currently building a new home and will use the p...

ToddL99 — Tue, 02 Mar 2021 16:23:12 GMT

In the case of personal residences, there are no provisions for "rolling the profit from one house over to a new house". That tax provision (Sec 1031) only applies investment properties - broadly stated, a 1031 exchange (also called a like-kind exchange or a Starker) is a swap of one investment property for another.

You may, however, qualify to exclude all or part of your gain. The exclusion is worth up to $500,000 (married filing jointly and otherwise qualify); if filing separately, the exclusion would be up to $250,000.

See Tax Aspects of Home Ownership: Selling a Home for additional details and the requirements for claiming this exclusion.

Re: My husband & I sold our home in 2020. We are currently building a new home and will use the p...

Opus 17 — Tue, 02 Mar 2021 16:27:31 GMT

[removed, never mind]