Rolling profits from the sale of my home to an IRA?

Question

I know I could roll home sale profits tax free(at least for now) to the purchase of another home, but can I do anyting similar to roll it tax free to a college fund/IRA of anykind?

Answer 1

The profit from the sale of your home is exempt from any tax if you lived in it for 2 of the 5 years immediately prior to the sale. Up to $250,000 is exempt if your filing status is Single and up to $500,000 is exempt if you are Married Filing Jointly.

You do NOT need to purchase a replacement home to get the exclusion. That's the old "Rollover Replacement Rule" and was a deferral, not an exemption, that was thrown out about 10 years ago.

If you wish to put some of the profit in an IRA you are free to do so if you are otherwise eligible to make an IRA investment, i.e. you have at least that much in taxable income and you have not already contributed the maximum amount for the tax year in question. If the profit is tax exempt, I'd highly recommend a Roth IRA since the gain is tax free upon withdrawal if you wait until age 59 1/2.

Answer 2

The rule about rolling over profits from a home sale into the purchase of a new home went out a few years back. The new rule is that if you lived in it as your main home for at least two years out of the five immediately before the sale, and owned it for two of those same five years, you can exclude up to $250,000 of any gain ($500K on a joint return) from being taxed. Under the old rules it was just deferred, unless you were over 65 - now it's excluded, and they don't care what you do with the money. So you're probably LOTS better off than under the rules as they were a few years ago.

If you don't meet the two year tests, you still might be eligible for a pro-rated exclusion if the move was due to a job change, health reasons, or other unforeseen circumstances.

Answer 3

Your profits (up to $250K if not married, $500K if married)from the sale of your principal residence are tax-free without any need to rollover the gain, as long as you have owned and lived in the home for two of the past five years.

You cannot rollover capital gains into an IRA. You could purchase a tax-deferred annuity, or use the gains to contribute the maximum IRA amount allowed over a period of years.