Will I have to pay taxes on $50,000 in gains from selling my house?

[jklosty]

Will I have to pay taxes on $50,000 I will make from the sale of my home?  I have lived in the house for 15 months and must sell in order to buy a bigger house to accommodate my my mother in law who will be coming to live with us.

[TomD8]

To qualify for the capital gains exclusion, you must have lived in the house as your primary residence for 2 of the 5 years leading up to the date of sale.  The two years need not have been consecutive; you also qualify if you lived in the house as your primary residence for 730 days during the 5 years leading up to the date of sale.

The tax law provides an exception to the two-year rules for use, ownership and claimed exclusion when the primary reason for the sale is health, change in place of employment, or, to the extent provided in IRS regulations, “unforeseen circumstances.”   The "unforeseen circumstances" accepted by the IRS are:

death,

divorce or legal separation,

becoming eligible for unemployment compensation,

a change in employment that leaves the taxpayer unable to pay the mortgage or reasonable basic living expenses,

multiple births resulting from the same pregnancy,

damage to the residence resulting from a natural or man-made disaster, or an act of war or terrorism, and

condemnation, seizure or other involuntary conversion of the property.

So it appears that your capital gain will be subject to taxation.

[jklosty]

Thank you for your quick response.   My mother in law moving in with us can not be characterized as an "unforeseen circumstance"?  Also, what is that rate in which I will be taxed?  Is 10% of the $50,000?  Thank you in advance for your time!

[TomD8]

The capital gains tax rate depends on your tax bracket. If you're in the 10% to 15% tax bracket, your capital gains tax rate is zero. If you're in the 25% to 35% tax bracket, your capital gains tax rate is 15%. If you're in the 39.6% tax bracket, your capital gains tax rate is 20%.

[BobB7]

It is possible that the higher income may affect other items on your tax return and result in more tax than just the 0 and 15% rates would suggest.

[jklosty]

Appreciated.  However, I have no idea what you guys are talking about because I am not very well versed in this subject matter.  So, if I am in 10% to 15% tax bracket I will pay nothing?  How can I figure out where I fall?  Also, would the IRS consider my mother in law moving in as an exemption to the tax?  Thanks again.