Capital Gains Tax on Sale of Primary Residence

[ThatGuy123]

Hello!

My wife and I bought our first primary residence, a small 1500 sqft 3 bedroom home, after we got married in July of 2020, down in Alabama. I went to working remote, so we used one of our bedrooms for my office. I spent about $20k remodeling the home during our stay there but most of that was into just major repairs that needed to be done. We found out we have a 2nd kid expected on January 1st of 2023, and I was up for a promotion to support multiple locations for my company including a spot in Utah, St. Louis Missouri. We needed a new residence with another room to handle the incoming kid, and with me taking the promotion that allowed me to continue working remote, so we opted to sell and move to KY (Centrally located ish for the sites I will be supporting for easier travel) and sold in May of 2022. We made a little over $50k in profit on our home.

My question is: Is there any room for a capital gains exemption on the sale of our home if I moved to facilitate work and to support an incoming child if we have not lived in the primary residency for 2 years? We were only there about 22 months. Or am I on the hook for 15% of the profit? To note, we immediately reinvested every penny into a new home in Kentucky if that holds any relevance.

Thank you!

[NCperson]

@ThatGuy123 - the challenges is that your move is for convenience.  Did your employer require you to move to KY?   Sounds like you could have stayed in AL.

reinvesting the profit has nothing to do with it - the law on that changed a generation ago. 

[ThatGuy123]

No, which is why I figured that wasn't a great option. I could have stayed in AL. Moved to be more central and take care of some of my parents/grandparents as they got older. As I'm not a primary care taker for them and they are not fully disabled, I don't think I can claim that either.

Ah I figured as much, couldn't find much literature to support that.

Is there a chance a partial exemption could be filed since we were there 22 out of the 24 months or is it an all or nothing statute?

[Mike9241]

you may be entitled to a partial exclusion so you may want to consult with a pro to do further research on these: 

job move - safe harbor based on distance

1) the change occurred during the period the taxpayer owned and used the property as their main home 

2) the new place of employment is 50 further from the residence sold than the former place of employment

the issue here is what is your new/old place of employment since you are working from home. 

also this is safe harbor provision 

the partial exclusion may also be available for unforeseen circumstances

the private letter rulings I've seen are when another child is born and the present home is too small to accommodate the entire family. so the question would be is expecting another child when the present residence would be inadequate for the family would be an unforeseen circumstance  

but there can be other criteria that may qualify you for the unforeseen circumstances.