I have a regular city home (owned 9yrs) & lake house (owned 3yrs). I spend time in both--never used either as a rental or other investment. Last year, I sold the lake house for a profit. I immediately bought another lake house. Is there any way to use the primary home exclusion rule to avoid long term capital gains? Any way to carry the tax burden into the new lake home? I appreciate your help! Bradley
The law that allowed you to defer gain if you bought a more expensive house expired in the mid-90s. If boht lived in and owned the previous home, you probably qualify for the exclusion.
How your sale qualifies. Your sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if all of the following requirements are met.
- You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.
- You didn’t acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.
- You didn’t claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.