Capital Gains Tax

[brathwaitejamaal]

If someone moved out of their primary residence (lived in for 3 years prior) in May 2020 and turned it into a rental property by what month and year do they have to sell the property to avoid paying capital gains tax? Considering the 2/5 year rule.

[NancyM5]

To exclude the gain on the sale of a personal residence (up to $250,000 for a single taxpayer and $500,000 for married taxpayers filing jointly) you will need to live in the house for two of the five years leading up to the sale.  If you moved out of the house in May 2020 than you would either need to sell it or move back into it before May 2023.  In your case, the five year period will run from May 2018 through April 2023 and you will have lived in the house for two years from May 2018 through May 2020.  Tax Aspects of Home Ownership: Selling a Home provides a good summary of this rule plus other important points regarding the profit from the sale of a personal residence.