Capital Gains Tax

[user17577323767]

If I bought my house in May of 2020 and in a october of 2022 I had to go to a different state for medical care and have now been in the other state - if I wait to sell my house next year I will have owned it for 6 years and lived the first two in it but am away for medical reasons but still plan on returning for a few months. When I sell will I only get partial exemption for health reasons or can I still get the full amount without the taxes since I am being treated elsewhere for medical but lived in it for the first 2 years I owned it. 

[Bsch4477]

You qualify for the full credit. 

[user17577323767]

But since the past 5 years wouldn’t only one year count and not make me eligible? Or just partial exception for the health stuff?

[Mike9241]

@Bsch4477 please clarify how OP meets 2-year use requirement in 5-year period if sold in 2026. the exception under the regs is as follows

reg 1.121-1

(c) Ownership and use requirements—(1) In general. The requirements of ownership and use for periods aggregating 2 years or more may be satisfied by establishing ownership and use for 24 full months or for 730 days (365 × 2). The requirements of ownership and use may be satisfied during nonconcurrent periods if both the ownership and use tests are met during the 5-year period ending on the date of the sale or exchange.

(2) Use.

(i) In establishing whether a taxpayer has satisfied the 2-year use requirement, occupancy of the residence is required. However, short temporary absences, such as for vacation or other seasonal absence (although accompanied with rental of the residence), are counted as periods of use.

(ii) Determination of use during periods of out-of-residence care. If a taxpayer has become physically or mentally incapable of self-care and the taxpayer sells or exchanges property that the taxpayer owned and used as the taxpayer's principal residence for periods aggregating at least 1 year during the 5-year period preceding the sale or exchange, the taxpayer is treated as using the property as the taxpayer's principal residence for any period of time during the 5-year period in which the taxpayer owns the property and resides in any facility ...licensed by a State or political subdivision to care for an individual in the taxpayer's condition.

[user17577323767]

based of point (ii) since one year in the last 5 years would have been at the property before having to leave to receive medical care - that would still qualify for full credit? 

[Bsch4477]

Op posted “I bought my house in May of 2020 and in an october of 2022 I had to go to a different state”.  Wouldn’t that satisfy the 2 year requirement?

[VolvoGirl]

If they sell in 2026 then 2020 is outside and before the 5 year window.   It's based on the date of sale.  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.

[user17577323767]

But what about since the person had to leave for health reasons 

[AmeliesUncle]

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@user17577323767 wrote:

based of point (ii) since one year in the last 5 years would have been at the property before having to leave to receive medical care - that would still qualify for full credit? 

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When away from your this home, did you "reside in the facility" that provided the care? 

A couple of other problematic issues:

• If you don't meet the two year test, leaving for medical care and the sale of the home are not "proximate in time", which may disqualify the reduced exclusion.
• You said you are planning on returning to the home.  Making it your Principal Residence again would trigger "Nonqualified Use", which prorates the amount of gain that can be excluded.