Selling your house?
“Dear Gary: Is it true that once you moved out of your primary house and then you rent that house and then you buy a bigger house - that you have so many months so you can sell that primary and be able to touch the money w/o paying taxes on the profit I make? Any advice is very much appreciated. Thanks.”
***ANSWER:
What you’re talking about is IRS Section 121: sale of your primary residence.
The rule is that if you own and live in your home for at least 2 of the past 5 years, you may sell it and exclude all your gain up to $250,000 for individuals or $500,000 for couples.
That means if you’ve lived in and owned your home for 2 or more years, you can move out for up to 3 years (but not a day longer!) and sell it and get that tax break.
Also, you mentioned buying a bigger house. So that there’s no confusion, I want to mention that this law does not require you to buy another home at all. The old law that changed in 1997 let you roll-over your gain if you bought another, more expensive home. That rule no longer applies.
Note: there are exceptions to the 2-year rule. Depending on why you moved, if you move before owning and living in the home for 2 years, you may yet be eligible for a reduced exclusion that could still reduce your tax bill to zero.
For questions, email me GaryK@GaryKent.com or call me at (858)457-KENT.
Always verify any tax-related information with your tax professional.
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