I sold a home that was my primary residence - I owned it for under 24 months. One reason I moved for Covid-19 related - do I still have to pay all cap gains taxes?

[123456789098767676]

Home was in MA.
I sold and make a significant profit after owning for only 18 month.
A main reason that I sold was Covid-19 impacts and the home not being a good work from home environment.

[ColeenD3]

It is possible to take a partial exclusion, but you must meet the qualifications. Choose one from below if it applies to you.

Work-related move.

You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold:

• You took or were transferred to a new job in a work location at least 50 miles farther from home than your old work location.
• You had no previous work location and you began a new job at least 50 miles from home.
• Either of the above is true of your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence.

Health-related move.

You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold.

You moved to obtain, provide, or facilitate diagnosis, cure, mitigation, or treatment of disease, illness, or injury for yourself or a family member.

You moved to obtain or provide medical or personal care for a family member suffering from a disease, ill-

ness, or injury.

Family includes:

1.Parent, grandparent, stepmother, stepfather;

2.Child, grandchild, stepchild, adopted child, eligible foster child;

3.Brother, sister, stepbrother, stepsister, half-brother, half-sister;

4.Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law;

5.Uncle, aunt, nephew, niece, or cousin.

A doctor recommended a change in residence for you because you were experiencing a health problem.

The above is true of your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence.

Unforeseeable events.

You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold.

• Your home was destroyed or condemned.
• Your home suffered a casualty loss because of a natural or man-made disaster or an act of terrorism. (It doesn’t matter whether the loss is deductible on your tax return.)
• You, your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence:

1.Died;

2.Became divorced or legally separated;

3.Gave birth to two or more children from the same pregnancy;

4.Became eligible for unemployment compensation;

5.Became unable, because of a change in employment status, to pay basic living expenses for the household (including expenses for food, clothing, housing, medication, transportation, taxes, court-ordered payments, and expenses reasonably necessary for making an income).

An event is determined to be an unforeseeable event in IRS published guidance.

Showing facts and circumstances.

If your circumstances don’t match any of the standard requirements described above but the primary reason for sale, based on facts and circumstances, is work-related, health-related, or unforeseeable. Important factors are:

• The situation causing the sale arose during the time you owned and used your property as your residence.
• You sold your home not long after the situation arose.
• You couldn’t have reasonably anticipated the situation when you bought the home.
• You began to experience significant financial difficulty .

[Hal_Al]

You're probably not going to get a solid yes or no answer.  You'll need to make that decision and hope you can back it up in case of an IRS inquiry. 

I don't think you meet  the health related exception.   Covid would appear to  qualify as an unforeseeable event, but how it impacted you needs to be justified

Health-Related Move

You meet the requirements for a partial exclusion if any of the following health-related events occurred during your time of ownership and residence in the home.

• You moved to obtain, provide, or facilitate diagnosis, cure, mitigation, or treatment of disease, illness, or injury for yourself or a family member.

• You moved to obtain or provide medical or personal care for a family member suffering from a disease, illness, or injury. Family includes your:

  1. Parent, grandparent, stepmother, stepfather;

  2. Child (including adopted child, eligible foster child, and stepchild), grandchild;

  3. Brother, sister, stepbrother, stepsister, half-brother, half-sister;

  4. Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law;

  5. Uncle, aunt, nephew, or niece.

• A doctor recommended a change in residence for you because you were experiencing a health problem.

• The above is true of your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence.

Unforeseeable Events

You meet the standard requirements if any of the following events occurred during the time you owned and lived in the home you sold.

• Your home was destroyed or condemned.

• Your home suffered a casualty loss because of a natural or man-made disaster or an act of terrorism. (It doesn’t matter whether the loss is deductible on your tax return.)

• You, your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence:

  1. Died;

  2. Became divorced or legally separated;

  3. Gave birth to two or more children from the same pregnancy;

  4. Became eligible for unemployment compensation;

  5. Became unable, because of a change in employment status, to pay basic living expenses for the household (including expenses for food, clothing, housing, medication, transportation, taxes, court-ordered payments, and expenses reasonably necessary for making an income).

An event is determined to be an unforeseeable event in IRS published guidance.

Other Facts and Circumstances

Even if your situation doesn’t match any of the standard requirements described above, you still may qualify for an exception. You may qualify if you can demonstrate the primary reason for sale, based on facts and circumstances, is work related, health related, or unforeseeable. Important factors are:

• The situation causing the sale arose during the time you owned and used your property as your residence.

• You sold your home not long after the situation arose.

• You couldn’t have reasonably anticipated the situation when you bought the home.

• You began to experience significant financial difficulty maintaining the home.

• The home became significantly less suitable as a main home for you and your family for a specific reason.

Source: Publication 523 https://www.irs.gov/publications/p523#en_US_2019_publink100073098

[gensmanpc]

Similar situation, my mother moved out of her home of 50+ years in 2020 due to a cancer and Alzheimer's diagnosis. She is already getting the $250k single filer exemption, but the home sold for $500k and the capital gains for fed and state are crazy, and she needs those funds for assisted living. Is there more tax deductible amounts that can be applied due to her move beyond the $250?   

[JamesG1]

No other deductibles but how was the basis of the home determined?

If, at some point, your mother inherited one half of the home, that one half of the property may be eligible for a stepped-up basis such as in this example.

Originally purchased for $50,000 by two taxpayers, each taxpayer has a $25,000 cost basis.

Upon death of one taxpayer in 2015 with fair market value of $450,000, perhaps your mother inherited one half of property at a stepped up basis as follows:

Cost portion of basis $25,000

Inherited portion of basis $225,000

Total Basis   $250,000

Selling price $500,000

Basis  $250,000

Gain $250,000 all of which is eligible for exclusion.

See this IRS Publication pages 9 and 10.

[Hal_Al]

If your parents lived in a community property state ( Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin) the entire basis "steps up" on the death of the first spouse.  In JamesG1's example her new basis would be $450,000.

[gensmanpc]

Purchase price in 1964 was $13,200 by 2 married taxpayers.

Divorce in 1986, estimated property value was $125k in that year

Mom inherits porperty in divorce settlement.

She sells property in Aug 2020 for $476k

Her basis would be half $13,200 = $6,600, plus half value in 1986 = $62,500? Correct?

Thank you

[Hal_Al]

No.  Getting the other half interest via divorce is not "inheiting" it. He basis in the other half is the same $6600.  Total basis is still $13,200.