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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant
Category: Capital Gains and Losses
Satisfied Customers: 307
Experience:  Tax Accountant at Praxair, Inc.
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I asked this question already but it was closed, I did not

Customer Question

I asked this question already but it was closed, I did not get a clear response. I own a house that we lived in for 10 years. I moved out 2 years ago and had it rented for 1 year, now I want to sell the house. From what I've read the 2 out of 5 rule applies
to be able to exempt me from paying capital gains on the sale of the house, let's say I bought the house for 200k and am selling it for 400k, I'm married, have been for 30 years and we both lived in the house. I did not claim any depreciation on the house,
I did claim 1 year of rent as income and some expenses, but it was a net revenue for 1 year. Can you confirm that I do fully qualify for the cap gain exemption? does it matter that I rented it out for 1 year? my main concern is not depreciation, it is clarification
on whether I can claim the entire $250k exception from capital gain given I've rented it for 1 year. I've been married for 20 years and filing jointly always. thanks.
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Jonathan Tierney replied 1 year ago.
According to IRS Publication 523, your home qualifies for the exclusion if:How your sale qualifies. Your sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if the following is true: If you paid cash for your current home, you did not have a 1031 exchange. It does not matter that the house was rented for a year as long as the home was your personal residence for two of the past five years. Publication 523 states that the home's basis should be decreased as result of depreciation, but renting the home out as an investment does not disqualify you (and your spouse) from the exclusion, so you will qualify. You can read the full publication here: http://www.irs.gov/publications/p523/ar02.html#en_US_2014_publink100010379I hope this answers your question. Let me know if you have any other questions. JonathanYou owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.You did not acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.You did not claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.

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