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Level 1

Owned a home for 20 months, was on unemployment 4 months prior to selling back to work one month and then sold it. can i use the unemployment exemption for capital gain?

 
3 Replies
Level 7

Owned a home for 20 months, was on unemployment 4 months prior to selling back to work one month and then sold it. can i use the unemployment exemption for capital gain?

You must be able to meet the basic rules or an exclusion.  Unemployment is one of the acceptable exclusions through an unforeseeable event (shown below).  This will allow, at least, partial exclusion.

Unforeseeable events

You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold.

  • Your home was destroyed or condemned.

  • Your home suffered a casualty loss because of a natural or man-made disaster or an act of terrorism. (It doesn’t matter whether the loss is deductible on your tax return.)

  • You, your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence:

    1. Died;

    2. Became divorced or legally separated;

    3. Gave birth to two or more children from the same pregnancy;

    4. Became eligible for unemployment compensation;

    5. Became unable, because of a change in employment status, to pay basic living expenses for the household (including expenses for food, clothing, housing, medication, transportation, taxes, court-ordered payments, and expenses reasonably necessary for making an income).

  • An event is determined to be an unforeseeable event in IRS published guidance.

TurboTax will walk you through the process.

  • Use the search box, upper right, to go directly to the entry location:  home sale
  • Continue to enter your sale and TurboTax will intuitively exclude the allowable gain.
  • Click the images attached to enlarge and view for assistance.
Level 5

Owned a home for 20 months, was on unemployment 4 months prior to selling back to work one month and then sold it. can i use the unemployment exemption for capital gain?

Hello @DianeW

 

I have a related question:

  • I moved into my current home on July 1, 2017
  • I sold my previous home on November 7, 2017 and I did use the Home Sale Tax Exclusion
  • I quit my job recently and my wife and I have no additional income (we are currently living off withdrawn IRA funds)
  • I want to sell my existing home and use the Home Sale Tax Exclusion again (I know the hurdle is that it hasn’t been two years since the use of the exclusion with the sale of my prior home; I have lived in my current home continuously for the past 25 months)
  • I anticipate my gain being less than $100,000 (wife and I will likely file jointly), so a partial exclusion would work fine (based off of the $500,000 typical exclusion pro-rating)
  • If I sale the home BEFORE November 7, 2019, will I qualify for the partial exclusion of gain via 26 CFR § 1.121-3 paragraph (e)(2)(iii)(C)?
    • (C) A change in employment or self-employment status that results in the taxpayer's inability to pay housing costs and reasonable basic living expenses for the taxpayer's household (including amounts for food, clothing, medical expenses, taxes, transportation, court-ordered payments, and expenses reasonably necessary to the production of income, but not for the maintenance of an affluent or luxurious standard of living);

Thank You!

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Level 20

Owned a home for 20 months, was on unemployment 4 months prior to selling back to work one month and then sold it. can i use the unemployment exemption for capital gain?

You have a good case, however you mentioned that you quit your job which could possibly be a factor. Regardless, you are only a little over 3 months out from being eligible for the entire exclusion amount so it would be prudent to try and close after that date.