If I sell my home because I got a new job and needed to move closer will I have to pay capital gains? I have lived in my primary address for 18 months

[Brandon G J]

Awesome, 

Thanks for the answer! 

I've lived in my home for 11 months and am single so I would avoid CG on any gains below $114k~ and there is no requirement for me to spend that $114k on a house at my new location if I understand correctly.

Appreciate the info Opus

[tagteam]

---

@Brandon G J wrote:

I've lived in my home for 11 months and am single so I would avoid CG on any gains below $114k~....

---

You need to have owned and lived in your home (as your primary residence) for at least two out of the last five years in order to take advantage of the full $250,000 exclusion. 

If you have not complied with the foregoing, you may be eligible for a partial exclusion of gain but that is dependent upon the reason for the move, such as a move that was work-related (as @DoninGA indicated).

See https://www.irs.gov/publications/p523#en_US_2020_publink100073096

If you do not meet any of the requirements for a partial exclusion, you cannot exclude any of the gain.

[Opus 17]

---

@Brandon G J wrote:

Awesome, 

Thanks for the answer! 

I've lived in my home for 11 months and am single so I would avoid CG on any gains below $114k~ and there is no requirement for me to spend that $114k on a house at my new location if I understand correctly.

Appreciate the info Opus

---

Correct, assuming you meet the qualifications for the partial exclusion as described in publication 523.  You said you were moving for a new job, so you would appear to qualify, but you will need to review the list of qualifications and make sure you fit all of them.  I don't know you so I can't guarantee you qualify for the partial exclusion. 

[AveDog08]

What if when you 1st moved into your house your job was remote, comma and now it's in person? I was working from home for almost a year, comma now I have to drive 45 miles A-day to get to work get to work. With increasing gas prices I'm starting to find it difficult to make my mortgage payments.

[Opus 17]

@AveDog08  

You need to very carefully read the section in publication 523 called “do I qualify for a partial exclusion?“.

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

There is a general rule that allows you to claim a partial exclusion if you move due to an unforeseen financial hardship. There are also a small number of specific listed situations that will be accepted by the IRS as a reason that would allow an early sale to qualify for a partial exclusion.  These are known as “safe harbors.”  If you meet the circumstances of the safe harbor, your claim will be accepted, but if you don’t meet the safe harbor but can show an unforeseen financial hardship, you can still qualify for the partial exclusion.

The safe harbor for a job change, is a change in location of more than 50 miles (even if you don’t change employers.)  Your new job location must be 50 miles farther from your house then your old job location.  If your old location was your own home, but the new location is 45 miles from the home, then you don’t meet the safe harbor. A 45 mile change in job location might still qualify as an unforeseen financial hardship that makes it so difficult for you to afford the existing house that you were forced to sell.  It depends on the individual facts and circumstances, and you must be able to show that it is not merely convenient for you to move closer to your job location, it must be a financial hardship for you to maintain the more distant home.

The financial hardship must also be unforeseen. For example, if you moved into your new home less than two years ago and you have been working from home due to the pandemic, it is probably not unforeseen that the pandemic restrictions would eventually be relaxed and you would be asked to work at the main workplace.  However, if you were promised remote work and the company has now changed their mind for other reasons, that might be truly unforeseen circumstances.

If you believe you qualify for the partial exclusion, you don’t have to send any proof to the IRS when you file your tax return, just claim the partial exclusion on your tax return. However, you should save documentation for at least three years after you sell your home in case you are audited.

[Mike9241]

The documentation that the IRS is likely to ask for if you are audited is what is your income and how is it spent - specifically on what - mortgage, gas, utilities, food, clothing, 401K, 

in my opinion, things like a 401K could be an issue since its voluntary 

see if you can manage to hold out for another 6 months because once you have owned and lived in the property for 2 years you'll qualify for the $250,000 exclusion. 

[DravJohnson]

I sold a home I'd lived in more than 2 of the past 5 years earlier this year and bought a new home. 7 months later, I'm selling the new home due to a new job that's multiple states away. Can I use the 7/24 exclusion on the gains from my 2nd home sell within the same calendar year?

[tagteam]

---

@DravJohnson wrote:

....Can I use the 7/24 exclusion on the gains from my 2nd home sell within the same calendar year?

---

Yes, provided the new job location is at least 50 miles farther from the house sold than your former place of employment. 

You still qualify (by reason of change in place of employment) despite the fact that the house is being sold in the same calendar year.

[haskell99]

I feel like I understand what's been said here and read IRS 523 but read on another forum something that I'm not sure of. 

I bought at house and lived in it for 14 months. I got a new job across the country, moved, and rented out the house for 20 months. Now I'd like to sell. 

My understanding, from the worksheet in 523, is that I can take 54% of the exemption (14/24.) 

But I read elsewhere online that, since I am renting it out prior to the sale, it is 100% a business property and subject to 100% of the capital gains tax. That's not how it looks to me based on 523. 

Any guidance would be appreciated prior to selling so I know what to expect. 

Thanks, 

Eddie

[AmeliesUncle]

---

@haskell99 wrote:

I bought at house and lived in it for 14 months. I got a new job across the country, moved, and rented out the house for 20 months. Now I'd like to sell. 

My understanding, from the worksheet in 523, is that I can take 54% of the exemption (14/24.) 

---

You can take 54% of $250,000/$500,000.

That exclusion does not cover depreciation for the rental.

So if your gain is less than 54% of $250,000/$500,000, you will only pay tax on the gain due to the depreciation when it was rented.

[orchid6856]

Hellow , 

We are moving to Temecula, CA from El Cajon, CA.  We plan to sell the current primary residence after living here for nearly 16 months and me and my wife file taxes jointly .  However we also sold the previous property after living there for more than 3 years  on December 2020. The current move and anticipated current property sale is because of job relocation. If we make capital gains out of the current property sale, can we exclude full amount allowed for capital gains up to $500,000 per couple or only partial exclusion is allowed and if so what is the formula?

[RaifH]

A portion of your gain would be excludable if your move brings you more than 50 miles closer to the location of your new job. The portion is calculated by looking at the shortest of the following three periods:

• The time between the date of a home sale that you excluded from income and the date of the sale of this home
• The time you owned the home that you are now selling
• The time you lived in the home that you are now selling

The partial exclusion would be based on the shortest of the three periods. If you lived there for 15 months and sold your old place 13 months ago, rather than being able to exclude the full $500,000 for a joint return, you would be able to exclude 13/24 or $270,000. Thank you @tagteam for correcting me on this. 

@orchid6856  [Edited 03/09/2022|10:54 AM PST]

[tagteam]

---

@RaifH wrote:

Again, you only qualify for the partial exclusion if you have not already used the exclusion within two years of the date of sale of the home. 

---

A work-related move is an exception to the "once every two years" rule so @orchid6856 may qualify for a partial exclusion.

[nuges01]

I have a scenario I'd like to get some clarity on if you'd permit:

My wife and I bought a house in CT on June 7, 2019 for $160k, then in August 2020 we had to move to NJ for new jobs. We figured it was too early to sell after 1 year, so we rented it out instead. We rented it out from August 1, 2020 to July 23, 2021 - which was the day it was sold. We lived in it for a total of just under 14 months, and rented it out for just under 12. (Sale price was $180k if relevant).

After renting it out - in 2020 - we purchased another house in NJ. We sold the CT house in 2021 because of the provision that allows us to move more than 50 miles without incurring capital gains taxes. I am worried though that because we bought another home that we lived in concurrent to renting out the CT home, the CT home would be considered a rental business (or at least not a main home) and would be subject to capital gains. Can anybody shed some light on this for me please?

Thanks

[GeorgeM777]

The partial exclusion from gain depends in large part on your motivation in selling your old home.  The IRS has stated the following with regard to partial exclusions:

"...you may still qualify for a partial exclusion of gain. You can meet the requirements for a partial exclusion if the main reason for your home sale was a change in workplace location, a health issue, or an unforeseeable event."

Below is the chart you would use to determine what, if any, partial exclusion you would be eligible to receive.  At the end of the chart there is a reference to a taxable gain in connection with rental use.  Gain from the sale or exchange of your main home isn’t excludable from income if it is allocable to periods of non-qualified use. Non-qualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as your main home.

You did have a period of non-qualified use in that you and your spouse were living in NJ at a time when your CT home was not your main home.   While there are some exceptions to non-qualified use, those exceptions do not seem to apply here.  Thus, to the extent the gain you realized from the sale of your old home was attributable to the period of time when you were renting the property, then such gain would not be excluded from income. 

Below is a link to an IRS webpage that addresses the sale of a home and partial exclusion of gain, among other things, that you might find helpful.  

IRS Pub 523_Selling Your Home

@nuges01