I know the 2/5 year rule changed in 2009 to exclude non-qualified use, just checking to see I am still qualified for a full exclusion due to job change.
2012-2015 Primary residence
2015-2021 Rent out due to job change (more than 50 miles)
2021-2024 Went back to old job and use the house as Primary residence.
If I sell the house in 2024 can I claim exception on non-qualified use for years during 2015-2021?
or do I need to go with prorated exclusion which is 6/12*$250,000 = $125,000
you don't have any nonqualifed use (NQU) NQU does not include any portion of the 5 year period ending on the date of sale that is after the last day used as your principal residence.
You can get the full exemption on the cap gain however you must recapture the depreciation allowed or allowable as ordinary income first ... the program will ask for that amount in the sale of home section.
Q. If I sell the house in 2024 can I claim exception on non-qualified use for years during 2015-2021?
A. No.
Q. Do I need to go with prorated exclusion?
A. Yes.
I'm of the opinion that the exception for non qualified use after it was no longer your primary home is measured from your moving out in 2024 and not from your 2015 move out.
The wording in the TurboTax interview is "If you used your home for reasons other than your primary residence after it was no longer your primary home, select “no”
@john1922 wrote:
or do I need to go with prorated exclusion which is 6/12*$250,000 = $125,000
Yes, you have six-ish years of Nonqualified Use. However, the exclusion doesn't work the way you stated.
For simplicity, let's say your Nonqualified Use is exactly 50% of your total ownership period. In addition to the tax due to the gain from depreciation, 50% of your gain will be taxable.
The other 50% of your gain (not including the gain due to depreciation) is able to be excluded, up to $250,000 ($500,000 if married filing jointly).
Does that make sense?