Primary Residence Exclusion

[Jamboman1]

If spouses filing jointly live in one home together for two years (within the last 5 years) and then move to a new home (while still owning the original home) and live there for two years (within the same 5-year block), can both homes be sold in a single year with one spouse taking the $250K exemption on the original home and the other spouse taking the $250K exemption on the new home? 

I guess the main question is whether their living in the same home in both instances negates the potential for the separate-home treatment for the exemption (even though they each lived 2 of the last 5 years in the respective homes on which they intend to use the exemptions) and they have not used the exemption (jointly or singly) in the last two years. 

If the answer is "yes", how does one do this in TT? 

Thanks!

[klmarchant]

I'm not sure but you could ask a CPA or professional tax preparer if both you and you spouse filed Married Filing Separate:  One of you takes the $250K exemption on one house, and the other, the other house.  I believe if one of you itemizes, than the other must also though.

[Jamboman1]

Hi klmarchant,

Thanks for this. Filing separate is not preferred, but it may be the best course.

Thanks again,

[SusanY1]

If the homes are owned separately, filing separately might allow for each spouse to separately exclude the gain.

However, if the homes are owned jointly, then you would each half to report half of each of the two sales and you can't exclude the sale of two separate main homes, even though each might have met the definition if sold in different years. 

You get one exclusion every two years (one home, one sale). When more than one "main home" meets the definition, you must choose the one on which you wish to exclude the capital gain.