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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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we have a permanent residence in NJ; if we change it to ...

Customer Question

we have a permanent residence in NJ; if we change it to Fla, will we have to pay capitol gains tax when we sell the NJ house ? we are 55yrs +
Submitted: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.

HelloCustomer

If the home in NJ is considered to be your primary residence, then you would be liable for capital gains on the sale of the home, but would be able to exclude $250,000 from those gains as an individual, or $500,000 if married filing a joint return. In order for a home to be classified as your primary residence, you must have owned the home for at least 2 years and you must have lived in the home for at least 2 of the past 5 years. If you meet those qualifications, then you can exclude the amounts listed above from any capital gains you have as a result of the sale. Your age is not a factor. There are no additional benefits regardless of age.

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Thanks, XXXXX XXXXX let me know if you need further clarifications on this.

Customer: replied 6 years ago.
if we make our fla home our primary residence, and eventually sell the NJ home, will we have to pay cap gains on the NJ home?
Expert:  Merlo replied 6 years ago.

Hello againCustomer

If your NJ home is currently your primary residence, then if you move to Florida without selling the home in NJ, you would have to sell the home within the next 3 years in order to take advantage of being able to exclude the $250,000 or the $500,000 from the gain.

Once 3 years has passed, if you no longer have lived in the NJ home then it would no longer be considered a primary residence. Any sale you made after that point you would be liable for capital gains tax on the full amount of the gain and would not be able to take the exclusion amount.

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Thanks again and let me know if you need more help.

Customer: replied 6 years ago.
what if you live 6mos in each home (fla and NJ) but declare permanent residency in Fla?
Expert:  Merlo replied 6 years ago.

Hello againCustomer

Unfortunately you can only have one primary residence at a time. A home can still be considered a primary residence even though you may have temporary absences, such as the case might be if you spend time a few months a year in a vacation home. But for tax purposes, only one home is classified as your primary residence.

Also, when you sell a home that is considered to be your primary residence, and you take advantage of the exclusion amounts that are offered, this can only be done every two years. So in other words you could not sell your NJ residence and claim an exclusion from the gain, and then turn around 6 months later and sell your Florida home and take another exclusion.

If this was helpful, please press the Accept button.

Thanks again and let me know if you need more help.

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Merlo
Merlo
9646 Satisfied Customers
25+ years tax consulting. Specializing in returns for US citizens living abroad