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Old 07-10-2015, 07:26 AM
 
34 posts, read 56,935 times
Reputation: 23

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No one I know seems to know the answer to my question. Hopefully someone knows here:

We bought our home and owned/lived in it for 4 years and 2 months before we sold it for a profit. Is that profit taxed since I lived in it for less than 5 years? The profit was no where near 200k as I have been reading that anything above 250k would be taxed (for singles and 500k for married couples).

Additional info if it helps any: We are purchasing a new house and will be using the money to close in two weeks.

thanks in advance!
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Old 07-10-2015, 07:50 AM
 
Location: Houston Metro
1,133 posts, read 2,020,839 times
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You answered your own question pretty much. As long as the proceeds from the sale were less than what the IRS cap is then you don't owe any taxes.
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Old 07-10-2015, 08:02 AM
 
34 posts, read 56,935 times
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So I am confused, since all the websites say "must have lived 2 out of 5 years", does that mean i have to OWN (not live) for 5 years?
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Old 07-10-2015, 08:45 AM
 
Location: Houston Metro
1,133 posts, read 2,020,839 times
Reputation: 1659
It just means that the home needs to have been your primary residence and that you weren't renting it or leaving it vacant for a large majority of the time spent in it. If this is the only property you own and you lived in it the entire time, that doesn't really matter because by default, that's your primary residence. Look up the IRS rules on 'use test'. The 2 out of 5 is just an example they use to determine primary residency.

Quote:
Originally Posted by chiu0nthls View Post
So I am confused, since all the websites say "must have lived 2 out of 5 years", does that mean i have to OWN (not live) for 5 years?
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Old 07-10-2015, 08:48 AM
 
34 posts, read 56,935 times
Reputation: 23
oh awesome!

Thanks for the info!! I wont go broke now! lol
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Old 07-10-2015, 12:58 PM
 
675 posts, read 1,453,548 times
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Married couples can exclude up to $500,000 on the gain of sale of your primary residence ($250,000 for singles).

The 2 last out of the 5 years applies to investment/rental property which means that if you did not live in that home (i.e. not your primary residence) the last 2/5 years you will be charged capital gains tax on the sale of the home. Then you get into deprecation recapture, etc on the sale of a rental. That's why proper tax/accounting advice goes a long way in minimizing your tax liability.
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Old 07-10-2015, 03:23 PM
 
98 posts, read 196,728 times
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Quote:
Originally Posted by chiu0nthls View Post
So I am confused, since all the websites say "must have lived 2 out of 5 years", does that mean i have to OWN (not live) for 5 years?
own & live
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Old 07-10-2015, 04:03 PM
 
Location: San Antonio, TX
1,297 posts, read 3,100,664 times
Reputation: 1168
im in the same boat. as long as youve lived in it for 2 years youre ok. dont worry about the 5 year part
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