I have a capital gains question. If we live in a house for 2 years, move, live in another house for 2 years and then sell both houses within 5 years how will that work?
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New Member

I have a capital gains question. If we live in a house for 2 years, move, live in another house for 2 years and then sell both houses within 5 years how will that work?

Both houses would meet the 2/5 years requirement, would that mean we wouldn't pay capital gains under $500k? 

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New Member

I have a capital gains question. If we live in a house for 2 years, move, live in another house for 2 years and then sell both houses within 5 years how will that work?

It depends.  You would only be able to exclude the gain on one home if you both owned the two homes and they both were recently sold.  There are a few parts to the gain exclusion on the sale  of a home:

That gain on the sale is excluded up to $250,000 ($500,000 joint) as long as:

  • You owned the home
  • It was your main home for two years or more within the five years leading up to the sale.
  • You waited at least two years between selling your primary home and excluding your first $250,000 or $500,000 from taxes. In other words, you may buy and sell as many primary homes as you'd like, but you'll only get this tax benefit once every two years.
Or per IRS Publication 523:  If you didn't sell another home during the 2-year period before the date of sale (or, if you did sell another home during this period, but didn't take an exclusion of the gain earned from it), you meet the look-back requirement. You may take the exclusion only once during a 2-year period.  https://www.irs.gov/publications/p523#en_US_2018_publink100073096

[Edited 4-18-19|9:28am]


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