Capital Gains on Residence 2 of 5 yrs
If I take the exclusion of capital gain tax on the sale of my old home this year, can I also take the exclusion again if I sell my new home in the future?You cannot exclude gain on the sale of your home if, during the 2-year period ending on the date of the sale, you sold another home at a gain and excluded all or part of that gain. If you cannot exclude the gain, you must include it in your income.
Exception. You still can claim an exclusion, but the maximum amount of gain you can exclude will be reduced, if the reason you sold the home was:
- A change in place of employment
- Health, or
- Unforeseen circumstances (as defined earlier)
With the exception of the 2-year waiting period, there is no limit on the number of times you can exclude the gain on the sale of your principal residence so long as you meet the ownership and use tests.
References:
- Publication 523, Selling Your Home
- Tax Topic 701, Sale of Your Home - after May 6, 1997
- Tax Topic 703, Basis of Assets
I lived in a home as my principal residence for the first 2 of the last 5 years. For the last 3 years, the home was a rental property before selling it. Can I still avoid the capital gains tax and, if so, how should I deal with the depreciation I took while it was rented out?If, during the 5-year period ending on the date of sale, you owned the home for at least 2 years and lived in it as your main home for at least 2 years, you can exclude up to the maximum dollar limit. However, you cannot exclude the portion of the gain equal to depreciation allowed or allowable for periods after May 6, 1997. This gain is reported on Form 4797 (PDF),Sale of Business Property. Refer to Publication 523, Selling Your Home, and Form 4797 (PDF), Sale of Business Property, for specifics on calculating and reporting the amount of gain.