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BJR
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I purchase a home in May of 2018 and had to sell it in March of 2019 due to family issues. Do I need to pay estimated taxes?

 
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I purchase a home in May of 2018 and had to sell it in March of 2019 due to family issues. Do I need to pay estimated taxes?

OK, first item to consider is whether you qualify for a partial exclusion of the capital gain.  Normally, you can exclude $250,000 of gain (or $500,000 if married filing jointly) for your personal home that you owned and lived in for at least 2 years before the sale.  

However, if you move due to an "unforeseeable event", you can qualify for a partial exclusion.  This is covered starting on page 6 here. https://www.irs.gov/pub/irs-pdf/p523.pdf

You might call it a hardship exemption although the IRS doesn't use the word hardship.

If you qualify for the partial exclusion, in your case you could exclude about 10/24th x $250,000 = $104,000 of capital gain.  If your gain is more than that, the overage is taxed as regular income, since it is short-term capital gain, property held less than one year.  You claim the partial exclusion in Turbotax; don't send proof of the unforeseeable event to the IRS but keep documents proving it for at least 6 years in case you are audited.

If you don't have an unforeseeable event, then the entire amount of the gain is taxable as a short-term capital gain.


Then, once you have determined how much of your gain is taxable, you will likely owe 22%, 32% or 35% income tax on the taxable part of the gain.  To avoid a penalty, you must either;

1. make a large enough estimated payment that you get a refund when you file your 2019 return or owe less than $1000; or

2. your withholding and estimated payments are at least 90% of what you owe in 2019, or

2. your withholding and estimated payments are at least 110% of your tax liability for 2018.  Your tax liability for 2018 is on line 15 of form 1040, it is the overall amount of tax you paid for the year before considering withholding.

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3 Replies

I purchase a home in May of 2018 and had to sell it in March of 2019 due to family issues. Do I need to pay estimated taxes?

This was your personal home?  Did you have a capital gain?  (Do you know what a capital gain is?)
BJR
New Member

I purchase a home in May of 2018 and had to sell it in March of 2019 due to family issues. Do I need to pay estimated taxes?

Yes.  It was my personal home.  I did not purchase another home.  Yes, I had a capital gain.

I purchase a home in May of 2018 and had to sell it in March of 2019 due to family issues. Do I need to pay estimated taxes?

OK, first item to consider is whether you qualify for a partial exclusion of the capital gain.  Normally, you can exclude $250,000 of gain (or $500,000 if married filing jointly) for your personal home that you owned and lived in for at least 2 years before the sale.  

However, if you move due to an "unforeseeable event", you can qualify for a partial exclusion.  This is covered starting on page 6 here. https://www.irs.gov/pub/irs-pdf/p523.pdf

You might call it a hardship exemption although the IRS doesn't use the word hardship.

If you qualify for the partial exclusion, in your case you could exclude about 10/24th x $250,000 = $104,000 of capital gain.  If your gain is more than that, the overage is taxed as regular income, since it is short-term capital gain, property held less than one year.  You claim the partial exclusion in Turbotax; don't send proof of the unforeseeable event to the IRS but keep documents proving it for at least 6 years in case you are audited.

If you don't have an unforeseeable event, then the entire amount of the gain is taxable as a short-term capital gain.


Then, once you have determined how much of your gain is taxable, you will likely owe 22%, 32% or 35% income tax on the taxable part of the gain.  To avoid a penalty, you must either;

1. make a large enough estimated payment that you get a refund when you file your 2019 return or owe less than $1000; or

2. your withholding and estimated payments are at least 90% of what you owe in 2019, or

2. your withholding and estimated payments are at least 110% of your tax liability for 2018.  Your tax liability for 2018 is on line 15 of form 1040, it is the overall amount of tax you paid for the year before considering withholding.

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