Home Buying in Chicago>Question Details

Nbalchandani, Home Buyer in 60657

Taxes on sale of primary home

Asked by Nbalchandani, 60657 Thu Feb 28, 2013

I bought a condo 2 years ago that I plan to sell this year. I have lived in this condo for entire 2 years and it is my Primary residence. Now according to IRS I would get tax exemption on the capital gain from the sale of the condo if

The capital gain is less than 250k (as I am single)
The condo is my primary residence and I should have lived there for two out of the five years before the sale

Does this mean that I have to hold onto the condo for 5 years before I sell to get the tax break or that it should be my primary residence for 2 years after which if I sell anytime I am eligible for the tax break?

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Answers

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Don Pasek’s answer
Hi, Nbalchandani:

It appears that you should qualify for this exemption, provided you haven't taken it for another property during the same time period. If you were to purchase another home immediately after selling this one (and taking the exemption for this one), lived in it for two years, then sold it immediately, you would also qualify to take an exemption for that new home.

What counts is that you used the home as your primary residence for two of the past five years. I outlined another unusual example in an answer to another question by Trulia. You can see that example here: http://www.trulia.com/voices/Home_Buying/How_does_the_two_ye…

IRS Publication 523, available from the IRS website at http://www.irs.gov/taxtopics/tc701.html, contains eligibility requirements for this deduction. In general, the IRS site has a lot of useful and plain-English information about how tax law applies to real estate. Take a look!

Regards,

Don Pasek, CIPS, TRC, ADPR
Omniterra Real Properties
Chicago
+1 (773) 763-7000
1 vote Thank Flag Link Thu Feb 28, 2013
If you lived there 2 years, you would be fine.
0 votes Thank Flag Link Thu Feb 28, 2013
It seems that the question was answered.

Take the money and run!
0 votes Thank Flag Link Thu Feb 28, 2013
Dear Homeowner,

To have complete certainty talk to a tax professional, preferably a CPA.
0 votes Thank Flag Link Thu Feb 28, 2013
You probably should ask an accountant, but I am 100% sure you only need to live there for 2 straight years to qualify to avoid profit of up to 250K.
Otherwise it is 2 out of 5 consecutive years also to qualify. So after the fist 2 consecutive years living there you could rent it out for the next 3 yrs and if you sell (close) before the 5 consecutive years is up, you also qualify. I have done this in the past. You are lucky if you will have a profit, after all your closing costs both on the buy and sell side.
0 votes Thank Flag Link Thu Feb 28, 2013
If you plan on purchasing again, then the capitol gains roll into the next home. I understand it as a one time exemption that people take when they sell their last home and move into retirement village. I would consult your accountant to be certain.

Best regards,
Ivan Sagel
312.515.7823
Ivan@atproperties.com
0 votes Thank Flag Link Thu Feb 28, 2013
You do not need to hold on to the condo for 5 years, AS LONG AS you have lived there for 2 years as a primary residence, which you mentioned that you have, you would qualify for that 2 years. The 5 year rule applies if you live there on and off for 5 years, or rent it for a portion of 5 past years, then of the past 5 years of ownership you would need to prove that it was your primary residence for at least 2.
0 votes Thank Flag Link Thu Feb 28, 2013
Congratulations for having this dilemma! Many sellers are looking at taking losses.

Good luck with your next purchase.
Web Reference: http://www.BJDHOMES.com
0 votes Thank Flag Link Thu Feb 28, 2013
It only needs to be your primary residence for two of the last five years. You do not have to hold on to it for five years.

Can I help you sell it?

Jeff Nobleza
Baird & Warner
773-677-5340
0 votes Thank Flag Link Thu Feb 28, 2013
You can sell at any point after living there for 2 years and take the 250k exemption to capital gains taxes.
0 votes Thank Flag Link Thu Feb 28, 2013
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