Martinsburg, WV asked in Real Estate Law and Tax Law for West Virginia

Q: If a home sales (lived in more than 2 yrs), with proceeds <$100K, will I get taxed if I sit on the money buying a house

Will the proceeds get taxed capital gain if I take my time 1 to 2 years not buying another house. Proceeds of the home sales is less than $100K

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1 Lawyer Answer
Matthew J. Sherman
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  • Tax Law Lawyer
  • Boca Raton, FL

A: If you meet certain conditions, you may exclude the first $250,000 of gain from the sale of your home from your income and avoid paying taxes on it. The exclusion is increased to $500,000 for a married couple filing jointly.

1) Your home sale must not have been property you acquired in a like-kind exchange (1031 exchange), during the past 5 years.

2) You owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of sale (date of the closing). For a married couple filing jointly, only one spouse has to meet the ownership requirement.

3) You owned the home and used it as your residence for at least 24 months of the previous 5 years. The 24 months of residence can fall anywhere within the 5-year period, and it doesn't have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period. Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion.

4) You didn't sell another home during the 2-year period before the date of sale (or, if you did sell another home during this period, but didn't take an exclusion of the gain earned from it). You may take the exclusion only once during a 2-year period.

Whether you received a gain from the sale of the home depends on what your cost basis was in the property (the purchase price of the property + costs of improvements to the property over the course of your ownership). If you did sell the property at a gain and are otherwise eligible for the capital gain exclusion, the entire gain would be excluded from taxation as the proceeds are under 250k.

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