When can exempt capital gains on selling my home?
We bought a new home in October 2022 and sold the old home in February 2023. We used our exemption to avoid capital gains tax for our 2023 taxes. When would we be able to claim exemption on any capital gains tax on real estate again?
Answers
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When you sell your main home, you can exclude up to $250,000 (or $500,000, if you're married filing jointly) of any gain you realize from the sale of that home from your taxable income for the year.
The residence you sell will qualify as your 'main home' so long as you:
- resided in the home for at least two of the last five years (these years do not need to be concurrent with one another)
- owned the home for at least 2 out of the five years preceding the date of sale
You can also only claim the exclusion if you did not already claim it for another home sold within the last 2 years.
A couple of other exceptions may apply. You can find further information about those on the IRS website below. Refer to the 'Eligibility Step 5—Exceptions to the Eligibility Test' section for details.
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Hi,
You can claim the home sale exemption on the gain ($500,000 for a married couple) once every two years, providing you have owned and lived in the home for 2 out of the previous 5 years. Given your timing, you are eligible for the exemption again in February 2025.
If you have additional questions, please let us know.
Thank you.
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Thank you! This was my understanding, but I wanted to make sure!
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Assuming it goes by the month and not specifically to the day of a particular month?
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My wife and I sold our main home last year for less than $250,000. We purchased home in 2015 for $120,000. We rented home to our son for a portion of 2023 and 2024 and included rental income on our taxes. I was told that we would not be charged capital gains on home sale because was less than $500,000 threshold (filing jointly) but when I enter numbers into FreeTax, we do realize a capital gain tax. Can you explain please?
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Hello,
Is it possible that the taxable number you are seeing is the recapturing of the depreciation. When you sell a home that has been rented, you must recapture the depreciation that is taken or should have been taken. This is taxed at ordinary income tax rates since it was deducted on the Schedule E at those same rates.
If this is not the issue, let us know.
Kenneth
