Statistically, the average person moves every seven years. So the rules regarding the sale of residence should be familiar, but I've found that often people remember rules that were in place in the last century!
The following is a general review of the current guidelines. As long as you follow these rules, you should be able to avoid paying taxes on up to $250,000 of gain on an individual tax return and $500,000 on a joint return.
The rules are fairly basic. During the five year period ending with the date of the sale you must have owned and occupied the home for two of the last five years.
In addition, you can only exclude the gain from the sale of a personal residence every 730 days.
But, what happens if I don't live in the house, and own it for two of the last five years, is there an exception to this rule? There are three ways that you may qualify for a partial exclusion.
Work Related Move Required
Generally, changes to your job location may allow you to claim the exclusion, if both of the following apply.
1. The change in employment must have occurred during the
period you owned the home and used it as primary residence.
2. The new location of employment must be at least 50 miles
farther from the residence than the former place of
Health Related Move Required
If health is the reason for the sale or exchange, it must involve a disease, illness, or injury of a qualified individual; or the sale must be made in order to obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. The regulation makes it clear that it requires more than merely being beneficial to one’s general health or well-being.
This exclusion allows for events determined to be unforeseeable per IRS published guidance. A few examples are: destruction of the home, casualty loss (man-made or natural), death, unemployment, divorce/legal separation, or multiple births. Other circumstances may qualify.
For more complete details of IRS guidelines go to:
IRS Sale of Home
Please see our Legal Statement.