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You can qualify for a partial exclusion if the reason you are selling in less than 2 years is a hardship -- hardship in this case means military orders, a change in job requiring a move of more than 50 miles, or a change in life circumstances that forces you to change houses and that was unforeseeable when you bought the current house.
(One example the IRS gives is, if you have a 2 bedroom house and give brith to twins, it might be a "hardship" justifying a move to a 3 bedroom house. But if you had the twins already and decided to try the 2 bedroom but it didn't work out, then that doesn't count because it was not unforeseeable.)
You don't submit proof of a hardship with your tax return, but keep it with your important papers for at least 3 years (7 is better) in case of audit.
You can qualify for a partial exclusion if the reason you are selling in less than 2 years is a hardship -- hardship in this case means military orders, a change in job requiring a move of more than 50 miles, or a change in life circumstances that forces you to change houses and that was unforeseeable when you bought the current house.
(One example the IRS gives is, if you have a 2 bedroom house and give brith to twins, it might be a "hardship" justifying a move to a 3 bedroom house. But if you had the twins already and decided to try the 2 bedroom but it didn't work out, then that doesn't count because it was not unforeseeable.)
You don't submit proof of a hardship with your tax return, but keep it with your important papers for at least 3 years (7 is better) in case of audit.
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