It is not an exit tax as so much as an estimated income tax payment on the gain paid at time of closing, its a way of assuring taxes will be collected. The payment cannot be less than 2% of the consideration received â€“ or gross proceeds from the sale. You should be exempt if the home was your primary residence under Section 121 of the IRS code.
Here is the info:
Section 121 of the Internal Revenue Code
Section 121 of the Internal Revenue Code, which is often referred to as the 121 exclusion, generally allows homeowners to sell real property held (owned) and used (lived in) as their primary residence and exclude from their taxable income up to $250,000 in capital gains per homeowner, and up to $500,000 in capital gains for a married couple filing a joint income tax return.
The 121 exclusion can only be used in conjunction with real property that has been held and used as the homeownerâ€™s primary residence. It does not apply to second homes, vacation homes, or property that has been held for rental, investment or use in a trade or business.
Homeowners are required to have (1) owned and (2) lived in the real property as their primary residence for at least a combined total of 24 months out of the last 60 months (two out of the last five years) in order to qualify for the 121 exclusion. The 24 months does not have to be consecutive. There are certain exceptions to the 24 month requirement when a change of employment, health, military service or other â€œunforeseen circumstancesâ€ have occurred.
You should speak to a tax professional as well.