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February 23, 2023
Question

Will I have to pay capital gains?

  • February 23, 2023
  • 4 replies
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I have owned my home since 2008.  I moved out of the country for 2 years Jan 2020-Jan 2022. I moved back into my home in Jan 2022. I have lived back in my home for 13 months.  I claimed the rental income during the 2 years of renting on my taxes.  I am selling my home.  Will I need to pay capital gains because I have not been back in my home for 2 years? 

4 replies

February 23, 2023

If you lived in the house for 2 out of the last 5 years, then you would meet the Home Sale Capital Gains Exclusion criteria.  So, if you lived in your home up until you left in January of 2020 and then moved back into your home, you would meet the 24 months.  The 24 months do not have to be consecutive. 

 

However, this will only exclude $250,000 of gains ($500,000 if Married Filing Jointly and you both meet the criteria).  If you have a gain greater than that, that will be taxed at your capital gains rate. 

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Carl11_2
Employee
February 23, 2023

To qualify for the capital gains tax exclusion, you must have lived in the property as your primary residence for 2 years (730 days) of the last 5 years (1826 days) you owned it, counting back from the closing date of the sale. The days it was your primary residence *do not* have to be consecutive. The only requirement is that all 730 days occurred within the last 1826 days you owned it.

 

Employee
February 23, 2023

@lindapoperealtor wrote:

I claimed the rental income during the 2 years of renting on my taxes. 


Note that you will have depreciation recapture for those two years of rental use which will not be excluded by virtue of the Section 121 home sale exclusion.

 

See https://www.irs.gov/publications/p523#en_US_2022_publink100026233

February 23, 2023

if you claimed rental income there should have been depreciation taken. if not run to a tax pro because the tax laws require that the depreciation taken or should have been taken must be recaptured when selling at a gain. the recapture comes before the home sale exclusion