121 home sale exclusion

[jrl124c]

If I purchase a new home and then a few months later sell my previous home, can I use the 121 home sale exclusion to exclude long term capital gains tax on the sale of my previous home?

[Mike9241]

To qualify for the home sale exclusion, you don't have to be living in the house at the time you sell it. Your two years of ownership and use may occur anytime during the five years before the date of the sale. This means, for example, that you can move out of the house for up to three years and still qualify for the exclusion if you have owned and lived in it for any 2 of the 5 years before sale.  

[VolvoGirl]

What is 121 exclusion?   For federal, doesn't matter that you bought the new house first....

For a primary home, if you owned and lived in your house for 2 out of the last 5 years when you sell you can exclude the gain up to $250,000 for single or 500,000 for married from tax.  You can not take a loss on your tax return.  If you made more than a 250,000 (500,000 for joint) gain then the amount over it is taxed. Doesn't matter what you did with the proceeds like buy another house or pay off the mortgage

IRS pub 523 house sale.  Figuring Gain or Loss on page 8.

http://www.irs.gov/pub/irs-pdf/p523.pdf

[Opus 17]

Yes.  Buying a new home first does not defeat the exclusion.  You only must meet the 2 year ownership test and the main home for 2 of the past 5 year test (731 or more days in the 5 years before the sale.)

However, note that you can't use the exclusion again for 2 years after the previous time you used the exclusion.  So if you wanted to sell your newest home and use the exclusion, you would have to wait 2 years and some number of months, based on the closing date of the previous sale. 

[tagteam]

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@VolvoGirl wrote:

What is 121 exclusion? 

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It's the section of the Internal Revenue Code that provides for the home sale exclusion.

https://www.law.cornell.edu/uscode/text/26/121