For a home sale and the exemption of sale proceeds, how is 24 months defined? For example, is it exact like 15 Feb 2021 to 15 Feb 2023, or simply Feb to Feb?

[alexseyevka]

Purchased home 15 Feb 2021.  What is the earliest date that will support a 24 month ownership for tax purposes (primary home)

[DoninGA]

It is a total of 730 days that you lived in and owned the home within the 5 year period from the date of sale.

[Mike9241]

technically the regs say 24 full months or 730 days IRS reg 1.121-1(c)(1). so sale on or after 2/15/2023

assuming you are married, only 1 of you must own the residence but both of you must meet the 2-year occupancy requirement.

temporary absences are ignored. 

close on 2/14/ 2023 and you lose the entire exemption unless you meet one of the partial exemption rules. 

[BostonKevin]

Hi!

I have a related question. Suppose I closed on the sale of our primary residence on November 30 2022.  This means that the 5 year period prior to the sale begins on November 30 2017.

On September 1, 2019, I started a new job well over 1000 miles away from this residence and worked there for a year until my wife joined me on August 1 2020. The house was subsequently rented out until we sold it.

Between September 1, 2019 and August 1 2020, I returned to live in the house for at least 28 days.  11 days in March, 2020, 12 days in May 2020 and 5 days in October 2019. 

My question is, how is my use of the house on these 3 occasions within the 5 year period before the sale of the  house taken into account? Could it count as 3 months?  As 2?

Thanks

Kevin

[Carl]

Basically, you must have lived in the property as your primary residence for 730 days of the last 1826 days you owned it. The lookback day count starts one day before you closed on the sale. If you closed on Nov 30, 2022, then day one of the lookback count is Nov 29, 2022 and you count back 1826 days. If the property was your primary residence for 730 days within the last 1826 days you owned it, you're good. Note that the days it was your primary residence do not have to be consecutive. But they all must fall within the last 1826 days you owned it.

[BostonKevin]

So would the 28 days that I spent in the house after September 1 2019 count towards the total? At that time, FWIW, I wasn't sure to stay in the new location, but I had to be in that location for the new job.

[BostonKevin]

And the house was our primary residence for tax reasons.

[Carl]

So would the 28 days that I spent in the house after September 1 2019 count towards the total?

That's your call, and you'd have to prove it if audited. For example, if you owned/rented another house during that time period, you can only have one primary residence at a time. So if you claimed a "home exemption" on property taxes (if offered such an option on property taxes) for the entire tax year on another home, then the first home could not be claimed as a primary residence when occupied at any time the 2nd home was being claimed as your primary home for the property tax exemption stuff.

Note also that if you do not qualify for the full exemption, you "May" qualify for a partial exemption. Read IRS Publication 523 at https://www.irs.gov/pub/irs-pdf/p523.pdf starting on page 6, under "Does your home qualify for a partial exclusion of gain?"

[Mike9241]

for the full exclusion the 2 rules are one or both of you must have owned the property for 2 out of 5 years before the sale and both must have occupied the residence as their principal residence for 2 out of 5 years before the sale. the periods of occupancy as their primary residence does not need to be the same. 

so, for your spouse occupying it as her principal residence from 11/30/17 to 7/31/2020 would mean she meets the 2-year occupancy test.  you occupied it from 11/30/17 to 8/31/2019 or 21 months/639 days (you use either full months or nights) 

you are going to have to make the call on whether you were occupying the house as your principal residence.

however, the way an IRS agent would look at these dates is - where is your job? where are you registered to vote? where are your vehicles registered? No one is conclusive but to job location is a major item and likely these days would not be included. 

Between September 1, 2019 and August 1 2020, I returned to live in the house for at least 28 days.  11 days in March, 2020, 12 days in May 2020 and 5 days in October 2019. 

so, your wife gets the full $250K exclusion.  since you had a job change you are probably entitled to a partial exclusion equal to days use as principal residence divided by 730 times $250,000

also, extremely important, before any home sale exclusion applies you must recapture the depreciation allowed or allowable during the rental period.