Q: If you are selling a property, how long must you have lived there in order to not pay taxes on the profit?
I've seen the "2 out of 5 years" rule floating around, but I'm not sure I fully understand it. It sounds like you must have lived there for 5 years total, but at least 2 of them had to be your primary residence...The home in question was my primary residence for almost 3 years total (always primary residence) and I'll be closing on it in a week or two...will I need to pay taxes on the profit from this home sale?
A:
There are two independent tests that you have to meet: the "use test" and the "ownership" test. You have to meet both of them in order to claim the exemption.
Ownership Test: This means that you have to have owned your home for at least 2 out of the last 5 years.
Use Test: You must have "used" your home as a primary residence in an aggregate of 2 years out of the last 5 years. This means that if you lived there in year 1 and then moved and lived somewhere else and moved back for year 4, then you would meet it as long as you were the owner. It sounds like if you have both lived there and owned for the last 3 years then you have passed both of the tests required to take the exemption.
Wes
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