Do I qualify for the reduction of property selling gains?

[junjunjun]

This is more of a question for tax year 2021.

I am a resident in CA, but my spouse lives and works in Canada.

We own a property together in CA.

Due to covid, my spouse can work from home, so she move to our property in CA with me since Feb 2020, but still working for the employer in Canada.

We decide to move to Oklahoma in July/Aug 2021, because my spouse find a new job there.

We will sell our property in CA and buy a new one in OK, when we move.

If we sell our property in CA, it will generate 400 - 500k profit gain based on current property market.

I have been resident in CA for the past 5 years owning/living that property as my primary residence, so I can deduct 250k from the gain.

However, my spouse does not reach the two year bar of living in the property, because she has been living in Canada in the past 5 years mostly, only moving to CA with me since Feb 2020 (likely 1.5 years in total using the property when we sell it).

But I also learnt that she may qualify us some reduction even under 2 years bar if the selling of the property is due to a job changing.

My question is based on our situation, can we claim the reduction of her part and by how much?

A bit more context, we always file jointly. She was filed as non-resident for CA before 2019, but a resident in 2020. We will together file as part-year resident in CA and OK for year 2021

[ErnieS0]

The exclusion is based on the fraction of months (or days) your wife lived there, so 1.5/2 is ~75% of $250,000 or $187,500.

Don’t forget to add improvements. Any improvements can be added to your cost to reduce taxable gain.

Related Resource:

• Does Your Home Qualify for a Partial Exclusion of Gain?