Home Sale Exclusion

[Bryan46]

Hi, 

I purchased my current primary resident home 2 years ago in July 2020. If I sell my house now, do I get the $500,000 exclusion? we are MFJ. 

Thanks,

[rjs]

If you have owned your home since July 2020 and sell it now, you meet the ownership requirement for the exclusion of gain. To get the exclusion, you must also meet the residence requirement and the look-back requirement, and other requirements. To get the full $500,000 exclusion, you and your spouse must both meet the residence requirement. See IRS Publication 523, Selling Your Home, for the details of the requirements for the exclusion.

[Bryan46]

So I don't have to possess the property for 5 years in order to satisfy the 2 years in the last 5 years condition right?

[rjs · Accepted solution]

That's right. You only have to own it for 2 years. You have owned it for 2 years, so you meet the ownership requirement.

You also have to have lived in it as your primary home for at least two years within the 5 years preceding the sale. That gives you the $250,000 exclusion. If your spouse has also lived in the house as his or her primary home for at least 2 years, then you qualify for the $500,000 exclusion on a joint tax return.

Note that the exclusion applies to the gain (profit), not the total selling price. The gain is basically the selling price minus what you paid for the house. In other words, it's the increase in value since you bought it. If you only bought the house a little over 2 years ago, the value probably has not increased by more than $500,000, unless it's a very large house or you are in a very hot real estate market.

[Bryan46]

Thank you, now I’m clear. 

[Opus 17]

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@Bryan46 wrote:

So I don't have to possess the property for 5 years in order to satisfy the 2 years in the last 5 years condition right?

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Correct.  You have to own the home at least 2 years, and live in it as your main home for at least 2 of the last 5 years.  You also can't use the exclusion until 731 days (2 years) after the last home sale when you previously used the exclusion.

So the date you have to wait for to sell your home to qualify for the exclusion will be determined by when you purchased the home (you're covered there), or when you moved in and started using it as your main home (if that happened on a different date), or when you sold your prior home (if you did), whichever is later.  

[Mike9241]

the ownership and use rules are for a period that ranges from 2 years up to 5 years before the sale. so if you meet the tests in 2 years you get the full exclusion. 

[tpvarley55]

forgive me if this is not the correct way to ask my question about a home sale. We file MFJ and sold our primary residence in 2022.  We lived there for 39 years. After working through all the steps , Turbotax is saying we don't qualify for the $500000 exclusion on the profit from the sale. Any thoughts on what went wrong?

[KrisD15]

You would enter the sale under

Federal

Wages & Income

Less Common Income (the last section)

Sale of Home (gain or loss) 

After entering the sale price and purchase price, 

Be sure you entered the correct dates (First Date Sold, next screen date Bought) 

did you select 

YES for Time You Lived in the Home

NO for Did You Use This Home for Anything Other Than Your Primary Home?

NO for Another Home Sale 

NO for Depreciation After May 6, 1997

NO for Additional Exclusion for Surviving Spouses

That should indicate that you are eligible for the exclusion

If you answered any of the above questions differently, which ones?