West Jordan, UT asked in Tax Law for Utah

Q: Will I have to pay taxes on the sale of my house?

I have lived in my house for the last 20 years. For the last year, I have lived with my daughter and her husband at their house in the same town. The reason I have not lived in my house is that I allowed my son and his family to live there for a short period while he transitions from Texas to Idaho as he searches for a job and residence. I have never stopped paying the rent and utilities, though my son has helped me some by giving me 400 dollars per month during most of the previous year. I am going to put my house up for sale this month and wanted to know if I will be responsible for paying any taxes on the sale. I will not be buying another house as I will be using the money to repair my daughter's house instead. The sale will be about $185,000 or less. My profit will be $100,000 or less.

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1 Lawyer Answer
Eric Steven Day
Eric Steven Day
  • Tax Law Lawyer
  • Henderson, NV

A: You will not have to pay taxes on the income of the sale of a personal residence for up to $250,000 (single taxpayer)/$500,000 (married filing joint taxpayer) of income. However, you must meet the ownership and use test:

During the 5-year period prior to the sale of the home, you must have:

- Owned the home for at least two years (ownership test)

- Lived in the home as your main home for at least two years (the use test).

These 2 years do not have to be consecutive either, as long as at least 2 out of the last 5 years you meet these requirements. For instance, you could have lived in the house your 1st and 4th year of the last 5 and it would still be excluded from income up to the limits mentioned above. The only time you will pay tax on the sale of the house is if you ended up renting the house out during one or more of the years you didn't live there. You would have to pay tax on the portion of the income that is considered a recapture of the depreciation you took while it was a rental (this is taxed at ordinary rates as well). Otherwise, you would be tax free up to the $250,000/$500,000 limitation.

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