Is there a one time exemption to the capital gains tax when purchasing a home for 50K less than what we sold our primary home of 5 years for?

[robertwhudson13]

We had a 50K capital gains when selling our home of 5 years. Is there a one time exemption for the capital gains tax if we purchase another primary home with in the same year even though it cost less?

[IreneS · Accepted solution]

You're thinking of the "old" rule when you had to purchase a replacement residence, but you're close!

The current rule is that you are able to exclude $250,000 of capital gain from the sale of your principal residence ($500,000 if married filing jointly).  To qualify for the exclusion, you must have owned and lived in the home for 2 of the last 5 years ending on the date of sale.

The sale of a principal residence is generally not reported on a taxpayer's return unless the taxpayer:

• Has a gain and does not qualify to exclude it all.
• Has a gain and elects not to exclude it.
• Receives a Form 1099-S for the sale.

If you wish to enter the sale of your principal residence in TurboTax to determine if there was a gain, please follow these steps:

1. Click on Federal Taxes > Wages & Income
2. Under Less Common Income, click on the Start/Revisit box next to Sale of Home (gain or loss).  
3. On the screen Sale of Your Main Home click the Yes box.  
4. On the Sold A Home screen, review the information you will need to enter and click Continue.  
5. On the Sales Information screen, enter the date sold, selling price, and expenses.  
6. On the next screen, Tell Us About the Purchase of Your Home, enter the date you bought or acquired your home.  
7. Also enter the Adjusted Cost Basis.  For help in calculating the adjusted cost basis, click on the EasyGuide box.

[Edited | 4/8/2020 |  11:34am PDT]