Q: 1099 form
I own a house and am selling it. I will only make around 100k from the sale. I lived in and have owned the house since 1987. However I did not live it in continuously over the last 5 years . Will I pay tax or am I exempt. Does the 2 out of 5 year rule only go back 5 years?
A:
In your situation, the key factor for tax exemption on your home sale is the IRS's "2 out of 5 year rule." This rule states that you must have lived in your house as your primary residence for at least two out of the five years immediately preceding the sale. It doesn't matter if these two years were consecutive or not, as long as they total two years within the last five years.
Since you mentioned you did not live continuously in the house over the last five years, it's essential to determine if the total time you lived there during this period meets the two-year requirement. If it does, you could be eligible for an exemption on capital gains tax for up to $250,000 if you're single, or $500,000 if you're married filing jointly.
If you do not meet this residency requirement, the profit from the sale may be subject to capital gains tax. However, there are some exceptions and specific circumstances that could affect your tax liability. Given the complexities of tax law and the potential for significant financial impact, it's advisable to consult with a tax advisor who can assess your specific situation and provide precise guidance. They can help ensure you comply with the tax laws and explore any potential avenues for reducing your tax liability.
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