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I am confused, maybe someone can help me? I have had my primary residence under 2 years (2 end of May) and want to relocate, buy another primary residence. Was told I "must" stay in my current home 2 years, or pay a large capital gains tax....whoever heard of such a thing!?!? That doesn't sound kosher...anyone know what the truth is?
You only have a capital gains tax if you make more than $250k on the house ($500k as a married couple). If you have owned it less than 2 years, you probably don't have the appreciation to hit those limits.
I did more sleuthing and YES, you must reside in your primary residence for 2 or more years, otherwise: capital gains tax on anything above and beyond what you bought it for. Bummer.....
I did more sleuthing and YES, you must reside in your primary residence for 2 or more years, otherwise: capital gains tax on anything above and beyond what you bought it for. Bummer.....
But you just said it will probably sell for the same as what you paid for it. If there is no gains there is no taxes. That's why it's capital GAINS tax. No profit no tax so you can sell.
Oh by the way, capital gains taxes are not a local SC thing, they are national federal thing.
Last edited by Brandon Hoffman; 02-11-2013 at 12:04 PM..
It's a federal IRS requirment, not state. Check with an accountant because there are all sorts of technical glitches with respect to short and long term gains and the possible allocation between joint owners, for example. You don't want to get zinged with a high liability because of a technicality.
But overall, if there is no gain then it shouldn't matter anyway, but there are rollover provisions on your primary residence that your accountant can fill you in on.
Thanks you guys, I am certainly hoping for some gain! I did not pay much and cannot move for that if I only break even.....I will wait out the 3 remaining months (I did speak to accountants) for the 2 years to take place......pooh.
I would think a paid-for place would be exempt, but not so.....
If you are moving and relocating your job also, then you can move prior to 2 years. Also health issues and unemployment can allow you to get the capital gains exclusion if you had the home less than 2 years....
Here is some info from IRS on allowable exlusions to the 2 year rule(if you lived in home less than 2 years)...
... to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons.
A change in place of employment.
Health.
Unforeseen circumstances
Change in Place of Employment
You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. Employment. For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. It also includes the start or continuation of self-employment.
Distance safe harbor. A change in place of employment is considered to be the reason you sold your home if:
The change occurred during the period you owned and used the property as your main home, and
The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles).
Example.
Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2011. He got a job in North Carolina and sold his townhouse in 2012. Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale.
Health
The sale of your main home is because of health if your primary reason for the sale is:
To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or
To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury.
The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being.
For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual, any of the following family members of these individuals.
Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law.
Uncle, aunt, nephew, niece, or cousin.
Example.
In 2011, Chase and Lauren, husband and wife, bought a house that they used as their main home. Lauren's father has a chronic disease and is unable to care for himself. In 2012, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion.
Doctor's recommendation safe harbor. Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence.
Unforeseen Circumstances
The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved.
Specific event safe harbors. Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home.
An involuntary conversion of your home, such as when your home is destroyed or condemned.
Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible.
In the case of qualified individuals (listed earlier under Qualified individual):
Death,
Unemployment (if the individual is eligible for unemployment compensation),
A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses, below) for his or her household,
Divorce or legal separation under a decree of divorce or separate maintenance, or
Multiple births resulting from the same pregnancy.
An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance.
Reasonable basic living expenses. Reasonable basic living expenses for your household include the following.
Amounts spent for food.
Amounts spent for clothing.
Housing and related expenses.
Medical expenses.
Transportation expenses.
Tax payments.
Court-ordered payments.
Expenses reasonably necessary to produce income.
Last edited by sware2cod; 02-16-2013 at 04:08 PM..
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