What are the exemptions for capital gains on house sale with new tax laws in 2018?

[JulieH1 · Accepted solution]

The new tax bill has many changes to capital gains, but fortunately, there is still a mechanism where selling a home can be excluded.

The IRS has a provision that can help homeowners avoid capital gains on the sale of their primary residence.

 To qualify, you must have owned your home and used it as your main residence for at least two years in the five-year period before you sell it. You also must not have excluded another home from capital gains in the two-year period before the home sale. If you meet those rules, you can exclude up to $250,000 in gains from a home sale if you’re single and up to $500,000 if you’re married filing jointly.

If you sell a home that was not a primary residence or that does not meet the above requirements, then you would pay capital gains on that sale.

[auspiciouslife]

someone told me with the new laws you must remain in home 4 out of 7 years

[Hal_Al]

The new law preserves the valuable break that allows you to potentially exclude from federal income taxation up to $250,000 of gain from a qualified home sale, or $500,000 if you are a married joint-filer. The earlier House and Senate bills both included restrictions (the longer time period you mentioned, actually  five out of the last eight years) on this break, but none of the proposed changes made the cut. So it’s business as usual.
Reference: <a rel="nofollow" target="_blank" href="https://www.marketwatch.com/story/10-things-you-need-to-know-about-the-new-tax-law-2017-12-20?mg=pro...>

[JulieH1]

Sorry the delay, I was answering other questions!  There were many different versions of the bill but luckily, the capital gains on the sale of a primary residence were left alone.  Check out this article about how housing costs change with the new law.
 <a rel="nofollow" target="_blank" href="https://www.forbes.com/sites/samanthasharf/2018/01/09/what-in-the-final-tax-bill-could-impact-your-h...>

[JulieH1]

That's a great article too Hal_Al! Thanks for listing it. Very helpful for me.

[auspiciouslife]

Thanks so much. Good news!

[divinemark]

Hello, thank you for the info. I sold my home in 2017 that was my primary residence for over 10 years. I'm not sure where I enter the capital gains in Turbo Tax?

[Hal_Al]

You don't enter it anywhere if the gain was less than $250,000 ($500K MFJ).

However, if you received a form 1099-S, you may want to enter it to avoid a possible (but unlikely) IRS inquiry.
In TurboTax (TT), enter at:
- Federal Taxes tab
 - Wages & Income
Scroll down to:
-Less Common Income
     - Sale of Home

[Pat-Cummings]

Thank you, Hal_Al!

[ccw007]

I sold house for $75K last year after owning 15 years.  After entering info on 1099S forms my return went from getting $2K to owing $10K.  I thought this was not to be taxed.  We rented for last 1.5 years but still lived 2 of last five year.  The only thing I can think of is in 2017 we may have depreciated it.  Thoughts?

[Zbucklyo]

You would potentially owe depreciation recapture tax on the sale.

[ccw007]

how would i calculate that or is that what Turbo tax is doing by going from +$2K to -10$K?

[Zbucklyo]

The change in tax liability sounds too high for just being depreciation recapture on a 75k house.  

[ccw007]

i think i figured it out - had not entered results of sale (primary rez 2 years in last 5).  In that section it asked me about depreciation in any year of ownership and looked at last years AMT dep. which said I took $200.  Since I entered the info for house sale i eliminated the info I typed in as business property (it classifies as a primary rez vs. business) and returns went back to +$2k versus getting taxed on capital gain (the gain was $75K not the sale price).  Thanks for the help