- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Coaching Changes
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Someone explain the live in primary two of five rule
Posted on 4/6/23 at 8:35 am
Posted on 4/6/23 at 8:35 am
I am seeing some info, but want to confirm.
My scenario...lived in my primary August 1, 2015-July 31, 2019. Became a rental August 1, 2019-June 31, 2022. The home I bought in between that time I lived in for three years and sold for $100k gain June 31, 2022. Moved back into my original primary.
I have been offered a new job opportunity and will take it in early August. I will have lived in the home for two of the previous five years, but I see that I can only claim this one time inside of every two year window. Is this correct?
If I cannot qualify, is there any option I do have besides a) eating the 20% tax or b) maintaining it as a rental status? The house would gain about $125k if I sold now. Anyway I can keep that $25k tax hit would be outstanding. I have even considered about making it a second home as I will still come back here a lot my first year on the job there.
My scenario...lived in my primary August 1, 2015-July 31, 2019. Became a rental August 1, 2019-June 31, 2022. The home I bought in between that time I lived in for three years and sold for $100k gain June 31, 2022. Moved back into my original primary.
I have been offered a new job opportunity and will take it in early August. I will have lived in the home for two of the previous five years, but I see that I can only claim this one time inside of every two year window. Is this correct?
If I cannot qualify, is there any option I do have besides a) eating the 20% tax or b) maintaining it as a rental status? The house would gain about $125k if I sold now. Anyway I can keep that $25k tax hit would be outstanding. I have even considered about making it a second home as I will still come back here a lot my first year on the job there.
This post was edited on 4/6/23 at 9:31 am
4
Posted on 4/6/23 at 9:03 am to rpg37
quote:
scenario...lived in my primary August 1, 2015-July 31, 2019
quote:
July 31, 2022. Moved back into my original primary.
Oddly symmetrical (you were out of the house exactly three years). This seems like careful planning to take advantage of the tax rules.
Assuming that doesn't send up red flags you would seem to barely qualify for the two of five requirement. You are right at the boundary though.
Posted on 4/6/23 at 9:17 am to molsusports
quote:
Oddly symmetrical (you were out of the house exactly three years). This seems like careful planning to take advantage of the tax rules.
I was not planning to sell my previous residence, but a cash offer was made randomly I could not ignore. My plan was to live here two more years, and then sell, but this offer I cannot pass up. I won't say it was strategical, but now that the opportunity is there, I do want to maximize its opportunity. Is it wrong to maximize the tax rules as long as they are followed?
This post was edited on 4/6/23 at 9:17 am
Posted on 4/6/23 at 9:26 am to rpg37
quote:
Is it wrong to maximize the tax rules as long as they are followed?
I would say no. Although if I were in your position explaining myself to an IRS agent I would claim the timing was intentional because it seems wildly unlikely to be a coincidence in your favor otherwise
Seems like a great time to visit with a tax specialist to make sure you have no areas of vulnerability. You are raking in windfall capital gains tax free from your property on two consecutive years
Posted on 4/6/23 at 9:41 am to molsusports
By the time I move in August, I would have lived there only for 13 months. If I maintain ownership for another 11 months and frequent the residence as a second home, would this be allowed? In Oxford, I could easily make this work as I would be up here weekly still as the job is largely remote the first before requirements change. I am just trying to find anyway possible not to blow $25k in the move.
Posted on 4/6/23 at 10:43 am to rpg37
quote:
By the time I move in August, I would have lived there only for 13 months. If I maintain ownership for another 11 months and frequent the residence as a second home, would this be allowed?
You need an expert opinion but my guess would be not allowed. The capital gains exemption as I understand it means exemption only for a property that served as your primary residence for at least two of the last five years before it was sold.
Posted on 4/6/23 at 1:13 pm to rpg37
Does the $125k gain account for selling costs, improvements and repairs? How about depreciation recapture?
Posted on 4/6/23 at 1:28 pm to rpg37
quote:IRS.gov Publication 523
Does Your Home Qualify for a Partial Exclusion of Gain?
If you don't meet the Eligibility Test, you may still qualify for a partial exclusion of gain. You can meet the requirements for a partial exclusion if the main reason for your home sale was a change in workplace location, a health issue, or an unforeseeable event.
Work-Related Move
You meet the requirements for a partial exclusion if any of the following events occurred during your time of ownership and residence in the home.
You took or were transferred to a new job in a work location at least 50 miles farther from the home than your old work location.
Use worksheet 1 to determine partial exclusion. I think you'd qualify for 50%/$125k. (Double if married)
This post was edited on 4/6/23 at 1:32 pm
Posted on 4/6/23 at 3:28 pm to rpg37
quote:
If I maintain ownership for another 11 months and frequent the residence as a second home, would this be allowed?
Is there a reason the other house has to be your primary residence? Just claim the homestead exemption on the house for 11 more months and claim it as your primary, unless there is some other reason you can't do that.
Posted on 4/6/23 at 6:14 pm to rpg37
work related move is forcing you to sell. You'll be allowed to claim some exception. Hard part is you also rented the home. I can't recall how that impacts the exception but it does. I think you have to show % of time it was your primary residence over the 5 year period or something like that.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News