Hello JA Customer,
Is this home that you are selling for $600,000 your primary home? Have you actually lived in that home for at least 2 of the last 5 years?
Or is this home a vacation property or rental property?
Hello again JA Customer,
Under current law, taxpayers may exclude up to $250,000 of any gain they have on the sale of their primary home before paying tax. The exclusion amount is increased to $500,000 if you are married filing a joint return, which I assume you are.
The IRS defines a primary home as one you have owned for at least 2 years and one that you have lived in for at least 2 of the last 5 years. The 2 years use requirement does not have to be consecutive months. If you have more than one home, your primary home is considered to be the one where you spend the most time. Since it sounds as though you spend equal time between your FL home and your NJ home, you could classify the NJ home as your primary residence for purposes of this tax exclusion. You can only claim one principal residence at a time and you can only claim this dollar exclusion on the sale of a primary residence once every two years. So if you decide to claim this NJ residence as your primary home for tax purposes, all that really means is that you could not turn around and sell your FL home for at least another 2 years if you again wanted to claim the exclusion on that sale.
The botXXXXX XXXXXne here is that if you paid $44,900 for this home and then added improvements of another $55,000 or so, that brings your actual basis up to around $100,000. If you now sell the home for $600,000 you would have a $500,000 gain. However you meet both the ownership tests and the use tests to claim the $500,000 exclusion. That being the case, you would not owe any capital gains tax on the sale of this home.
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Thank you JA Customer