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Kinginthenorth0315
Level 1

Selling my Home- Do I qualify to avoid capital gains tax?

We purchased in Nov. 2019 and we are planning to sell with a buyer move-in date being after Nov.7th(The date we moved in 2019). This being exactly two years as our primary home, Does this help me avoid the capital gains tax?

8 Replies
DoninGA
Level 15

Selling my Home- Do I qualify to avoid capital gains tax?

If you sold your primary personal residence and you lived in and owned the home for at least two years (730 days) in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

If you had a gain greater then the exclusion amounts then you would have to report the sale. Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported.

tagteam
Level 15

Selling my Home- Do I qualify to avoid capital gains tax?

Note the requirements set forth in Treas. Reg. 1-121(c)(1):

 

(c) Ownership and use requirements -

 

(1) In general. The requirements of ownership and use for periods aggregating 2 years or more may be satisfied by establishing ownership and use for 24 full months or for 730 days (365 × 2).

Mike9241
Level 15

Selling my Home- Do I qualify to avoid capital gains tax?

buyer move-in is not the relevant date for the 2 year period it's the date of closing. you must have 

lived in and owned the home for at least two years (730 days) in the five year period ending on the date of sale.

 

if you move out before the two years to let the new owners move in before closing, you have not met the two year test 

Opus 17
Level 15

Selling my Home- Do I qualify to avoid capital gains tax?

You must own the property more than 2 years (calculated from closing date to closing date) and you must live in it as your main home for at least 2 years.  Most of the time, you can consider the home as your main home from closing to closing.  But if you moved your furniture and took a new lease somewhere else that was significantly before the closing date, the IRS would probably not let that slide.  

 

 

Both 2 year requirements mean more than 730 days.  Exactly 2 years (exactly 730 days) does not qualify because exactly 2 years is not more than 2 years. 

 

If you must close and/or move out in less than 731 days, you may qualify for a partial capital gains exclusion if the sale or move was for certain unforeseen circumstances, like a job change, you have to move for medical necessity, and certain other reasons.  In that case you could claim a partial exclusion.  The situations that qualify for a partial exclusion are listed in publication 523. https://www.irs.gov/pub/irs-pdf/p523.pdf

 

The amount of partial exclusion is calculated from whichever is shortest:

  1. The number of days you owned the home.
  2. The number of days you lived in the home as your main home.
  3. The number of days since the last time you claimed the exclusion.

 

The normal exclusion is $250,000 or $500,000 if married filing jointly.  Suppose you closed on the home after owning it for 720 days, you lived in the home as your main home for 699 days, and the last time you used the exclusion was 733 days ago.  In that case, you could claim 699/730=95.6% of the usual exclusion limit.  Turbotax will calculate this for you.  If you claim the partial exclusion for unforeseen circumstances on your tax return, you don't send proof of the circumstances with your return, but keep the proof for at least 3 years in case of audit.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
tagteam
Level 15

Selling my Home- Do I qualify to avoid capital gains tax?


@Opus 17 wrote:

Both 2 year requirements mean more than 730 days.  Exactly 2 years (exactly 730 days) does not qualify because exactly 2 years is not more than 2 years. 


Did you miss the treasury regulation (below) I cited in an earlier post?

 

 

Treas. Reg. 1-121(c)(1):

(c) Ownership and use requirements -

 

(1) In general. The requirements of ownership and use for periods aggregating 2 years or more may be satisfied by establishing ownership and use for 24 full months or for 730 days (365 × 2).

Kinginthenorth0315
Level 1

Selling my Home- Do I qualify to avoid capital gains tax?

Thank you for all the replies. We plan on not having the closing date until a week after it's been 2 years as our primary residence. Based on the information everyone provided, that should keep us from having to pay the capital gains tax.

Steph4477
Returning Member

Selling my Home- Do I qualify to avoid capital gains tax?

What does level 15mean

mesquitebean
Level 15

Selling my Home- Do I qualify to avoid capital gains tax?


@ Steph4477 wrote:

What does level 15mean


It's a high level that indicates a long-time forum user who has participated in a certain number of discussions, read forum threads, provided a certain number of answers, had comments voted up (cheers), etc.    One earns "points" and badges for various activities.   Click on your forum profile name (or anyone else's) to see what "badges" have been earned and participation stats.

 

You can go to your own or another user's profile to see their stats by clicking their forum profile name.  Here's a direct link to yours:

https://ttlc.intuit.com/community/user/viewprofilepage/user-id/4529720

You can see your number of posts, solutions, cheers, etc. there under "Membership Stats."

 

Here are the badges you have earned so far:

https://ttlc.intuit.com/community/badges/userbadgespage/user-id/4529720/page/1

 

Right now you are at level "returning member."   But it will advance to Level 1 and then higher as you participate in the forum and accrue additional badges, etc.

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