Home Selling in Fresno>Question Details

Angela Stewa…, Both Buyer and Seller in Fresno, CA

I have owned and live in my home for just over one year. How long do I have to live in my home before I sell, to avoid capital gains taxes?

Asked by Angela Stewart, Fresno, CA Fri Feb 8, 2013

Help the community by answering this question:


Hi Abrookie,

I’m not a tax advisor or CPA -- anything I comment on below should absolutely be confirmed BEFORE taking any action to make sure all of your personal circumstances are weighed in making an informed decision.

Generally, under Section 121 of the Internal Revenue Code, a Seller can exclude up to $250,000 of the gain on the sale of a home if the Seller:
-Owned the home for at least 2 years during the 5-year period ending on the date of the sale (ownership test),
-Used the home as his or her principal residence for at least 2 years during the 5-year period ending on the date of the sale (use test); and
-Did not exclude gain from the sale of another home during the 2-year period ending on the date of the sale.

HOWEVER, for homeowners converting a second home or investment property into a primary residence, my understanding is the new Capital Gains Exclusion formula is no longer an all-or-nothing “2 out of the last 5 years” proposition.

INSTEAD, due to the Housing and Economic Recovery Act of 2008 passed into law Q308, which changed Section 121 Capital Gains Exclusion rules (effective 1/1/09) for homeowners moving into property formerly designated as a second home or investment property, the exclusion is now a ratio calculation based a home's actual usage as a primary residence over its qualified life, calculated as follows:

Capital Gains Exclusion =

(# of DAYS property was PRIMARY RESIDENCE) / (# of DAYS property was OWNED).
This is then multiplied by the (Profit from sale of the Property) to arrive at the exclusion amount.

There are many "twists & turns" concerning Tax Code Section 121/1031. Again, I would highly recommend you consult a tax advisor / CPA. Not knowing the actual rules is NOT a defense when dealing with the IRS!

0 votes Thank Flag Link Sun Feb 10, 2013
Hi Abrookie,

Since its your primary residence, you have to live there for 2 years out of 5 to avoid the gains tax. Talk to your tax consultant to get how much the tax would be. Since the inventory is low and demand is high, it might be a good decision to sell your place now.

Priya Viswa, MS
REALTOR®, Associate Broker
Mobile: (408) 707-8170
Email: pviswa@c21mm.com
Website: http://www.priyaviswa.com
0 votes Thank Flag Link Sat Feb 9, 2013
2 out of the previous 5 years, but the 2 years don't have to be contiguous.
0 votes Thank Flag Link Fri Feb 8, 2013
You have to have lived in your home a total of 2 years out of the last 5 years,
0 votes Thank Flag Link Fri Feb 8, 2013
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