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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Might be selling my home,living in less than 2years. Do I have

Resolved Question:

Might be selling my home,living in less than 2years. Do I have to pay capital gains on the sale of my previous home.
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello gareth,

What do you mean by the sale of your "previous" home?

On the home that you are selling now where you have lived for less than 2 years, what is the reason you will be moving. Job change? Medical illness?

Customer: replied 7 years ago.
The reason for moving is a transfer at my request. No hardship involved.The house I owned previous to this one ,was sold at a profit. If I sell my present home I will break even or lose some.So will I have to pay capital gains on the profit of the previous home.
Expert:  Merlo replied 7 years ago.
Hello again gareth,

1. Please tell me when the previous home was sold and how long you had owned that home and how long you had lived there prior to the sale.

2. What was your profit on the sale of that home?

3. When did you purchase the home you have now?

4. How far away will your new job location be from where you now live?

5. Do you file taxes as single or married?

Customer: replied 7 years ago.

owned home for 3years 5 months,lived there entire time

profit : approx 60,000.00

purchase present home -July of 08

From Chicago to Dallas

File: Single

Expert:  Merlo replied 7 years ago.
Hello again gareth,

Thank you for the additional information.

When you sell your primary home, as a single taxpayer you are allowed to exclude $250,000 from any gain you may have before taxes are due. In order to qualify as your primary home, 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 previous 5 years prior to the sale. So the first home you owned qualifies to be treated as a primary residence. If you profit was $60,000 on that home, then with your allowed exclusion of $250,000, you owe no tax on the sale of that home.

The home you currently live in does not qualify as your primary home because you have only owned it and lived there for approximately 13 months. However, depending on your reason for the sale, the IRS does allow you a partial exclusion. One of those allowed exclusions is for a Change in employment - you may qualify for the exception if you change jobs. The new place of employment must be at least 50 miles farther from your home than the former place of employment was. This is known as the "50 mile safe harbor rule". Because your new job is changing from Chicago to Dallas, you will more than qualify to claim a partial exclusion, even though the change in locations was your choice.

You will not be allowed to claim the full exclusion amount of $250,000, but you will be able to claim the percentage that applies to the same percentage of time you lived there out of a 2 year period. As an example, if you lived there for 13 months out of the required 24 months, then you lived there 54% of the 2 year time period (13 divided by 24) and you can claim 54% of the $250,000 credit, which would be $135,000. That would mean that when you sell this home, you can exclude $135,000 from any gain you have before any tax would be due.

You will of course have to figure the actual percentage you may claim based on the actual # XXXXX days you have lived there, but this is the formula you will use.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you gareth.

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