Submitted by SprayBubbly2506 t3_yiflx0 in personalfinance
My wife and I have owned our home since March 2021 and are currently thinking about selling to try to get into something bigger. Since we have owned our home less than 2 years, will we have to pay capital gains tax on the profits? If so, should we just wait 4 months to hit the 2 year mark to sell?
Thank you! How do you qualify for the partial exclusion?
You can only use the exemption every 2 years so no you will have to wait.
is that true even if this is our first home, so we have never used the exemption before?
You'd probably be better off waiting the 4 months (or to be more specific - setting the closing date as after the 4 months; using the intervening period to go through the sales process / deciding on your next purchase etc.).
If you sell within the 2 years - you don't qualify for the FULL exclusion upto $250K single / $500k married. You may still be able to claim partial exclusion if you had
a) a work related move
b) a health related move
c) Other unforeseeable factors.
https://www.irs.gov/publications/p523#en_US_2021_publink100073096
See the link above for more details on these criteria for partial exclusion.
Yeah you need to live there for 2 years before you do. I guess its to tax home flippers and people like that.
got it! thank you!!!
Work related (moving at least 50 miles for a work related reason), health related (moving because of better health care elsewhere for an ongoing issue), unforeseeable events (divorce or death of spouse, destruction of your house, a few others).
this is super helpful! thank you!
thank you!
Keep in mind that most escrows are 30-60 days. Selling your home could take anywhere from a few days to a few months depending on your home and how high you want to reach on price.
Werewolfdad t1_iuidbfb wrote
If the sale occurs prior to you owning it for 24 months and you don’t qualify for the partial exclusion, yes, it is possible you’ll owe capital gains taxes