Capital gains under 2 year

Forum|Forum|5 years ago
March 13, 2021
1 reply
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My question is about primary (only home) residence capital gains. I will be selling after owning for about 1 year. I believe we fall under the capital gains exception rule. Wife and I are moving for jobs. Irs publication 35 (or something like that..) names many scenarios how someone can get an exception. Including "unforseen circumstances" and taking a new job 50 miles+ away and others. My question is..we aren't being transferred...we quit, selling home snd moving. We'll then get new jobs in the new city. My concern is it seems like a loop hole...anyone could claim they moved because of a new job. They would move and just get a minimum wage job and tell the IRS "yup, got a new job". Is there any concern there?

As far as unforseen circumstances..after covid the job market here has not been good. But...how do I document this?? What if I get audited in 2022 or 2023?? I have an expected gain of $85K for 1 year in the home. As regular income...we'd be easily into 22% federal...big tax bill if it was determined I owned.

Not A Product Question

AnnetteB6

Level 15

Using the exception related to a change in job location, you will not qualify to claim the full exclusion of your gain. You may qualify for a partial exclusion that will be based on the time that you did own and live in the house.

As for documentation, you should have new W-2s and paperwork showing that you have changed residence to a new location, but it is unlikely that you would be required to provide any additional documentation. Qualifying for a partial exclusion would not be considered a loophole to be concerning especially since the exclusion is only allowed one time in any two-year period.

For your reference, this topic is discussed in IRS Publication 523, Selling Your Home.

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Maj92azAuthor

Level 2

Thank you! I feel better about this now. I reviewed that publication again to determine partial exclusion. I read it as...for married; one may exclude $500K of gain- after 2 years. So we would qualify for $250K being at about 1 year. We file jointly. We expect a $80-$100K gain. Seems we will fall well within our limits.