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Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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If we change our primary residence from our home in NJ to ...

Customer Question

If we change our primary residence from our home in NJ to our condo in Fla, when we sell the NJ home (now our secondary home) will we have to pay Capital Gains Tax on it ?? We are 55+
Submitted: 6 years ago.
Category: Tax
Expert:  jbrlaw replied 6 years ago.
As a married couple, you may make up to $500,000 in profit without owing capital gains ($250,000 if you are single). And, after 1997, you don't have a limit of the amount of times that you may sell a residence to benefit from this tax savings. If you have over the above amount in profit, then you may be taxed, or you might be able to roll the amount over into a new property.

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Customer: replied 6 years ago.
BUT THE NEW JERSEY HOME WOULD NOW BE OUR SECONDARY HOME; THEREFORE, THE QUESTION RE: PAYING CAPITAL GAINS TAX ON IT WHEN AND IF WE SELL IT. DON'T WE HAVE TO SELL IT WITHIN A CERTAIN PERIOD OF TIME ??
Expert:  jbrlaw replied 6 years ago.
My understanding is that, if you owned it for at least two years and you used it as your primary residence in 2 of the 5 years before the sale, then you pass the Use & Ownership tests required by the IRS. If you wait several years to sell the NJ property and it becomes only your vacation home, then you will have to pay capital gains taxes. It would be best to sell the NJ house within the first year or so after moving to FL and then, if desired, buy another vacation home in NJ. Then, you may benefit from the exemption on both properties (1st NJ home and FL home).

Please note that, if you rent the NJ home to others, the tax treatment is very different than what I have outlined.

Please let me know if I haven't answered your question.
Expert:  Merlo replied 6 years ago.

HelloCustomer

If the home you currently own in NJ is your primary residence, meaning you have owned the home for at least 2 years and yo have lived in the home for at least 2 of the past 5 years, then when you sell that home, even though you are liable for tax on the capital gains from the sale, you are allowed an exclusion on the gain of $250,000 for an individual and $500,000 for a married couple filing a joint return.

If you move to Florida and your NJ home is no longer your primary residence, then in order to take advantage of the exclusion amounts, you have to sell your NJ home within 3 years of moving to Florida. If you wait longer than 3 years, then you will no longer meet the requirement of having "lived in the home for at least 2 of the past 5 years" becaue the time period will have lapsed. So after moving to Florida, if you wait longer than 3 years to sell your NJ home, then at the time you do sell the NJ home you will be liable for capital gains tax on the full amount of the capital gain and will not be able to claim the exclusion.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Merlo
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25+ years tax consulting. Specializing in returns for US citizens living abroad