Do I Have to Pay Taxes on the Sale of My House? It Depends - WFFA CPAs

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If a taxpayer owns two houses throughout the five-year period, both may receive the exclusion if the taxpayer uses each of them as a primary residence for at least two years during the five-year period. However, as discussed below, CPAs will find that typically the gain on only one of the two otherwise certified houses can be excluded throughout any two-year period.

David lives in the Kansas house during 2000, 2001 and 2004 and in the Texas house throughout 2002 and 2003. David's primary home for 2000, 2001 and 2004 is the Kansas home. His primary home for 2002 and 2003 is the Texas home. If David chooses to offer among the homes throughout 2004, both qualify for the gain exemption because he owned and utilized every one as a primary residence for a minimum of two years throughout the five-year duration before the sale date.

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However, brief momentary lacks, such as getaways, are counted as durations of usage even if the house is rented during that time. On January 1, 2000, Elvira bought and began to live in a home. During 2000 and 2001, Elvira went to England for June and July on trip. Check Here For More offers the house on January 1, 2002.

For that reason, Elvira is eligible for the gain exemption. If, however, Elvira had spent June 1, 2000 to June 1, 2001 in England, she would not be qualified for the gain exemption because a 1 year absence is not dealt with as a brief temporary one. In the latter case Elvira utilized the home for only 12 months during the five-year duration ending on the date of sale.

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Postponing the sale up until a taxpayer has fulfilled those requirements may lead to substantial tax savings. Documenting the time spent at a house is necessary for anybody owning more than one because just the main house is qualified for the gain exclusion. To determine which home certifies as the taxpayer's primary home, the internal revenue service is most likely to make its basic inquiries.