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I bought a home in 2003, sold it 10 months later because I needed a larger home to accomodate myself and my mother, who is 84, and ailing. Many hardships have occured since I bought the new house: Hurricane Ivan doing extensive damage to the new residence just a month after I moved in, losing a good paying job that I had for over 8 years (including my health insurance), and having a major medical crisis that resulted in an operation costing close to $65,000. I haven't been able to find employment in my specialized field and I am now in a position where I need to move in with my mother to try and get myself back on my feet financially. If I don't sell my house, I'll lose it. Here is the question: Will I have to pay a capital gains tax for selling my home before I've lived in it more than two years? (I've lived in it for 1 year, 8 months) *I did not pay a capital gains tax for selling my first home, but I think I signed something explaining why I was selling before 2 years when I did my income tax. Help!!!!!!!!!!!!!
DearCustomer
Thank you for allowing me to tell you about the capital gains exclusion.
Generally, you can exclude up to 250,000 dollars in capital gains if filing singly or 500,000 in capital gains if filing jointly. As you have noted, this is predicated on owning and living in the home for at least 2 of the last 5 years.
However, in certain circumstances that are unforeseen and severe, you may take a reduced maximum capital gain. In other words, while you may may not be able to take the entire maximum exclusion, you may be able to exclude something.
Unforeseen circumstances include:
1. Divorce
2. Multiple child births from the same pregnancy.
3. A change in employment requiring you to relocate as long as certain safe harbor rules are met.
4. A change in employment where you lost your job and are eligible for and receiving unemployment benefits.
5. A change in employment where you can not afford basic daily living expenses.
6. Death
7. serious illness or disability of a qualifying person in your household.
8. Natural or man made disasters such as war, terrorism, hurricanes, etc.
9. Anything determined by the Commissioner of the IRS to be an unforeseen circumstance or disaster such as occurred with 9/11.
To determine how to figure the capital gain, and the reduced exclusion amount, please see:
IRS Publication 523, Selling your home: http://www.irs.gov/pub/irs-pdf/p523.pdf