Capital Gain on home sale: exactly 2 years and 1 d...
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kick53rv3
Level 1

Capital Gain on home sale: exactly 2 years and 1 day

We bought our house on June 3, 2019 (closing date) for $700k and if we list the house to sell now and set our closing date to June 4, 2021 for $800k.

 

A. I would be able to claim the tax exemption on the $100k profit from the difference and there won't be any tax charged for this transaction?

 

B. Also if I am selling due to relocating for work, having lived 23month out of 24month required would qualify me for the partial credit that offset this $100k gain as well right?

3 Replies
Hal_Al
Level 15

Capital Gain on home sale: exactly 2 years and 1 day

Q.  We bought our house on June 3, 2019 (closing date) for $700k and if we list the house to sell now and set our closing date to June 4, 2021 for $800k.  I would be able to claim the tax exemption on the $100k profit from the difference and there won't be any tax charged for this transaction?

A. That's correct. But note: you must both own and live in the house for the two year requirement.

 

Q. If I am selling due to relocating for work, having lived 23month out of 24month required would qualify me for the partial credit that offset this $100k gain as well right?

A. Yes, but it's actually better than that.  When the move is for work, the proration is not on your exclusion but on the maximum exclusion. For example you owned and lived in the house 23 months. 23/24 = 95.8%.  The maximum exclusion (filing Single) is 0.958 x 250,000 = $239,583.  Since your $100,000 gain is less than that, you may exclude the whole amount.

DavidD66
Employee Tax Expert

Capital Gain on home sale: exactly 2 years and 1 day

Maybe, and yes.  The date you bought and closed on the house may not be the date it became your primary residence.  When did you move into the house?  If you lived in the house, as your primary residence for 24 of the 60 months immediately preceding the sales date, you can exclude up to $500,000 of gain.  And as Hal Al, just said, if you move due to relocation, you would be able to defer the $100,000 gain.

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kick53rv3
Level 1

Capital Gain on home sale: exactly 2 years and 1 day

Thank you for the response! We are filing as married so it’ll have an bigger exception amount, good to know this now we can just sell it ASAP rather than trying to fit the closing date into the 2 year rule.

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