Home owner's Exclusion of Capital Gains Tax?

Question

I am currently under contract to sell my home (a primary residence) in NYC. At the date of closing, I will have lived in my home for just over 3 years. Can someone please confirm that I will be eligible to exclude any capital gains tax on the profits I make on the sale? The profits amount to less than $250k. I have read tax code 121 several times over, and my only confusion lies with the "within 5 years of the date of sale" language. Does this mean that I need ownership of at least 5 years? Please advise!

Answer 1

Section 121 only requires that you lived in and owned the home for 2 of the last 5 years. You could could take this exclusion every 2 years with a different house that you lived in. You will be able to take the exclusion based on the information you have provided.

Answer 2

You fulfilled the 2 year requirement by owning and using it as your principal residence for at least 2 years. The 5 year language doesn't apply in your case. It means that within the last 5 years, you had to have used the home for an aggregate of 2 years. For example: You owned a home for 5 or more years. In the current year (year 5) you didn't live in the home, and you didn't live in the house the two previous years either (year 4 and 3). But, you lived in the house for two years before that in year 2 and year 1. You would still qualify for the capital gain exclusion since you lived there 2 years out of the last 5 years. This would be true if you lived there in year 1 and year 3 also since it's the aggregate that matters. The only other important thing to note is the exclusion only applies if you haven't taken advantage of the exclusion within the last 2 years before the date of sale of the current residence.

Answer 3

You have lived in the home for at least years. Was this your principal residence during the time you lived in it? Was this time during the last five years? If so, then you satisfy the use test.

When did you purchase the property? Did you purchase it at least two years ago? If so, then you satisfy the ownership test.

If you satisfy the use and ownership tests, then you can exclude $250K of capital gains from the sale of your principal residence.

Answer 4

You're OK, and can exclude all the gain as long as it's under $250K. The only thing the five years does is that your period when you lived there can be any two of the previous five years.

Answer 5

You need to have lived in the house for 730 days during the past 5 years (excluding temporary absence; e.g., vacation.)