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If I sell my primary house within the first two years, will…

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If I sell my...

If I sell my primary house within the first two years, will I have to pay capital gains on the profit I make?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I bought my house in August 2016. In January 2018, somebody knocked on my door and said they want to buy my house because they are turning it into a development for a doctors office with the land behind me in my house. I’m going to make about $60,000 more than what I paid for the house in 2016. I was reading about it and it said that within the first five years if you sell your primary house, you must live there for two of the first five years to avoid capital gains. This is the primary house and I did not buy it for an investment property. It just so happened that I made quite a bit of money in the first two years.I didn’t know if I need to wait until August of this year to close or if I could close now and avoid the capital gains.

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I don’t think so

Submitted: 3 months ago.Category: Tax
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3/24/2018
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,607
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

You do need to wait until you have lived in your home for the full two years as your primary residence. From what you have stated, once you do live in the home for at least two years then you would qualify for the exclusion.

___

When the home is your primary residence for at least two years of the previous five years , you are able to exclude up to $250,000 if you file single and $500,000 if you file married filing jointly from your income.

____

This exclusion is under 26 U.S. Code § 121 - Exclusion of gain from sale of principal residence

https://www.law.cornell.edu/uscode/text/26/121

"(a)Exclusion

Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more."...

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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