topic Do I have to close on the exact date 2 years later to avoid Capital Gains tax in Investors & landlords

Do I have to close on the exact date 2 years later to avoid Capital Gains tax

ragemedia — Thu, 06 Jun 2019 00:02:51 GMT

We closed on our current house Jan 15th, 2016, we are scheduled to sell this house on Jan 2nd, 2018. This house has been our primary residence the entire time we have owned it. Do we need to see if we can push closing to the 15th 2018 or will the capital gains tax not apply because we have used this address for two congruent years on our taxes.

You need to have lived in the home as your personal prima...

DoninGA — Thu, 06 Jun 2019 00:02:52 GMT

You need to have lived in the home as your personal primary residence for a total of 730 days during the 5 year period from the date of purchase to avoid capital gains.

See IRS Publication 523 Selling Your Home page 3 - https://www.irs.gov/pub/irs-pdf/p523.pdf#page=3

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

jodonnelly — Tue, 07 Jun 2022 17:12:47 GMT

I realize this is an old post but hoping someone has some insight on this. We closed on our house 6/30/2020 and we are selling our house 6/30/2022. We purposely did this to meet the 2 year mark to avoid capital gains tax. Will exactly two years avoid this tax or should we push closing to 7/1/2022?

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

NCperson — Tue, 07 Jun 2022 18:12:33 GMT

the IRS guide simply states 'at least 24 months"

https://www.irs.gov/pub/irs-pdf/p523.pdf

right side of page 3

Eligibility Step 2—Ownership
Determine whether you meet the ownership requirement. If you owned the home for at least 24 months (2
years) out of the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement.

personally, if it were me, and it didn't upset the deal, I'd push it to July 1st to be safe.

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

Carl — Tue, 07 Jun 2022 21:58:07 GMT

I concur with @NCperson and would push it to July 1st to be safe.

Keep in mind that if you establish your "new" residence before the closing date of the old one, I don't know what consequences that will have for causing issues should you be audited on this matter. Typically, you move out of the old residence a few days before you actually sell it, at the least. But most home sales I'm aware of, the property was vacated by the owner a month or more before the sale so that the property is clean and empty for showings.

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

jodonnelly — Tue, 07 Jun 2022 22:04:49 GMT

Thanks! We’re going to close July 1st, just to be safe.

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

jodonnelly — Tue, 07 Jun 2022 22:06:26 GMT

We’re going to close on July 1st to be safe. We close on our new house on July 1st as well, so shouldn’t be any issues with moving. Thank you for your thoughts!

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

Mike9241 — Tue, 07 Jun 2022 22:26:24 GMT

you are not deemed to own your house on the date is is sold so your ownership would be 6/30/2020 through 6/29/2022

That's 729 days 1 day short of the 730 required and if using months you probably didn't own it for 24 full months. close on 7/1/2022

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

jodonnelly — Tue, 07 Jun 2022 22:30:49 GMT

That makes sense. Thanks for your input, definitely closing 7/1!

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

Cb303 — Mon, 02 Sep 2024 20:48:10 GMT

Hello, thanks for asking this question bc I’ve been curious. I understand you closed July 1st..& was wondering how you listed your home for sale. I want to list earlier to try and time it with my 2 year mark. Did you tell your buyer you cannot close until the certain date?

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

Mike9241 — Mon, 02 Sep 2024 21:15:12 GMT

both parties must agree to the closing date. it's listed in the sales contract. if the seller wants a closing date the potential buyer doesn't like then they'll look for another property.

Re: Do I have to close on the exact date 2 years later to avoid Capital Gains tax

NCperson — Mon, 02 Sep 2024 21:41:32 GMT

@Cb303 what is the reason for the move? it could be an exception is permitted and the two year mark is not necessary to achieve. please describe why you are moving...

new job in another city? medical situation? unforeseen circumstance? your family had twins? or just for your convenience?

the IRS publications describe a number of scenarios where the two year ownership / residence requirement does not have to be met and simply there is a proration of the tax exclusion and the capital gains would still all be tax free.