Sale of Personal Residence

Taxpayers who purchase a primary home generally know there is a $250,000/$500,000 exclusion from income for capital gains on the eventual sale of the home. $250,000 if you are single, $500,000 if you are married filing joint. The recently enacted Tax Cuts and Jobs Act of 2017 left this generous tax break intact so let’s re-visit the two key tests required to qualify for this exclusion. There is the (1) ownership test, and (2) the use test.

The ownership test: you must have owned the property for at least two of the last five years. The two years do not have to be consecutive and if you are married only one of the spouses need meet this requirement.

The use test: you must have lived in the home for at least two of the last five years. The two years do not have to be consecutive. If you are married both spouses must meet the use test, though it does not have to be concurrently.

There are certain exceptions to these rules, but in general taxpayers who qualify can take advantage of this exclusion up to a maximum of once every two years.