How can I shelter myself from a Capital Gains Tax on the selling of my primary residence? Look to do a new construction build, but my debt to income is maxed.

[FranklinFit]

Looking to secure a Land Loan and then due diligence to execute the construction loan.  I have equity in the house I currently own, but don't know if the timing will be right for selling my primary residence and closing on the construction loan.  Ofcourse, the least amount of money going back to the government is the end goal here.

[xmasbaby0]

SALE OF HOUSE

If your gain was more than  $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return.  Whether you re-invested the gain in to another house is irrelevant.  If you  have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

• If you are using online TT, you need Premier or Self-Employed software to report the 1099-S

[NCperson]

@xmasbaby0 - I think the reporting requirement is a little different than stated.. if you are issued a 1099-S, you must report the sale, even if the result is no capital gains tax....

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

bottom left of page 15......

"You received a Form 1099-S. If so, you must report the sale on Form 8949 even if you have no taxable
gain to report. See Instructions for Form 8949 and Instructions for Schedule D (Form 1040) for more details."

If you don't receive a 1099-S and your sales price is less than $250,000 / $500,000, there is no need to report the sale, but according to the 1099-S instructions, transferers are required to give the seller one and report the sale to the IRS.  

https://www.irs.gov/pub/irs-prior/i1040sd--2022.pdf

page 2 on the right: 

Sale of Your Home
You may not need to report the sale or exchange of your main home.

If you must report it, complete Form 8949 before Schedule D. Report the sale or exchange of your
main home on Form 8949 if:
• You can't exclude all of your gain from income, or
• You received a Form 1099-S for the sale or exchange.

[FranklinFit]

Follow up question, if the 1099-S is filed for the sale of a primary residence and the capital gains is under the 250k single or 500k married, will there be tax ramifications?

[DoninGA]

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@FranklinFit wrote:

Follow up question, if the 1099-S is filed for the sale of a primary residence and the capital gains is under the 250k single or 500k married, will there be tax ramifications?

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No.  There would not be any capital gains taxes on the sale.  The Schedule D and Form 8949 will show no taxes assessed.

[NCperson]

@FranklinFit - there are no tax ramifications as long as you meet the requirements for the tax exclusion.

as stated above, not only does the capital gains have to be no more than $250,000 / $500,000, but you must have OWNED and RESIDED in the home for 2 of the past 5 years.