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cathalk090
New Member

Forced to sell primary residence within a year of purchasing, due to job and career relocation. What are the tax implications or are there exemptions?

 
4 Replies
Hal_Al
Level 15

Forced to sell primary residence within a year of purchasing, due to job and career relocation. What are the tax implications or are there exemptions?

There is an exception to the 2 year rule if you have to sell due to a job change of more than 50 miles.  You may still exclude the full capital gain on the sale.  But, the maximum amount ($250K, $500K married) you can exclude is reduced.  Example: you only lived in the house 11 months.  The maximum amount you can exclude is 11/24 x $250K = $114,583 ($229,167 Married filing jointly).

cathalk090
New Member

Forced to sell primary residence within a year of purchasing, due to job and career relocation. What are the tax implications or are there exemptions?

So therefore if you were 7 months in the property 7/24 x 250k = $72,917, but because we are married filing jointly $145,833. Is this correct?

Hal_Al
Level 15

Forced to sell primary residence within a year of purchasing, due to job and career relocation. What are the tax implications or are there exemptions?

Yes.  Actually,  you go by days, rather than months. So, for example, 200 days/730 x $500K = $136,986.  It usually doesn't make much of a difference, but could. 

 

Opus 17
Level 15

Forced to sell primary residence within a year of purchasing, due to job and career relocation. What are the tax implications or are there exemptions?


@cathalk090 wrote:

So therefore if you were 7 months in the property 7/24 x 250k = $72,917, but because we are married filing jointly $145,833. Is this correct?


You can review the rules in publication 523.

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

 

The partial exclusion is based on the number of days out of 730 day (2 years) using the shortest of these three periods

  • how long you owned the home
  • how long you lived in the home as your main home
  • how long since the last time you used the exclusion

You don't have to send proof with your tax return if you claim the partial exclusion, but keep proof with your other important tax papers for at least 3 years in case of audit.

 

If your gain is more than your exclusion, you will want to reduce your gain to the lowest possible dollar amount by documenting all your allowable adjustments.  They are also listed in publication 523. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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