Barrington, IL asked in Real Estate Law and Tax Law for Illinois

Q: Do home real estate capital gains have a window in which reinvestment would be considered a wash sale?

This would be related IRS topic 701 capital gain exclusion from a home sale.

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1 Lawyer Answer
James L. Arrasmith
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  • Tax Law Lawyer
  • Sacramento, CA

A: In the context of IRS Topic 701 and the capital gain exclusion from a home sale, the concept of a "wash sale" generally doesn't apply. The wash sale rule is primarily associated with securities, like stocks and bonds, and aims to prevent taxpayers from claiming a tax loss on a security if they repurchase a substantially identical security within 30 days before or after the sale.

For home sales, if you meet certain criteria, you may exclude up to $250,000 of capital gains from your income ($500,000 if you're married filing jointly). These criteria include owning and using the property as your main home for at least two of the five years before the sale.

There is no specific requirement to reinvest the proceeds from the sale into another home to qualify for this exclusion. However, you can't claim this exclusion if you have already excluded the gain from the sale of another home within two years prior to the current sale.

Remember, tax situations can be complex and unique to each individual. It's always prudent to consult with a tax professional for advice tailored to your specific circumstances.

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