Will our home sale profit be taxed if we don’t roll it into the new house?

May 20, 2015 by Dave Du Val, EA
houses

Hey Dave,

My husband and I bought a home recently. We then sold the other house we were in a few months later. Will the profit we made on the house we sold be taxed if we do not roll it into the new house?

Bev

 

Bev,

Congratulations on the purchase of your new home. The rule regarding deferral of taxes when the profit on a home sale is rolled into a new home has not been around for quite some time.

The current rule allows you and your husband to exclude from your income up to $250,000 each on the gain from the sale of your primary residence. Therefore, the exclusion is $500,000 if you file jointly. If you lived in your previous residence for at least 2 years (actually, the code reads 2 out of the last 5 years, and the two years do not need to be consecutive), and neither of you have excluded similar gain in the previous two years, you are likely eligible.

If you owned and lived in your previous home for less than two years but were forced to move for a health-related issue or an unforeseeable event such as a death or divorce, you may be eligible for a reduced exclusion. Further information can be found in IRS Publication 523.

Best of luck in your new home.

Dave
 

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David E. Du Val, EA
Chief Compliance Officer for TRI Holdco

 

Dave Du Val, EA, is Chief Compliance Officer for TRI Holdco. Inc., the parent company of TaxAudit, and Centenal Tax Group. A nationally recognized speaker and educator, Dave is well known for his high energy and dynamic presentation style. He is a frequent and popular guest speaker for the California Society of Tax Consultants, the California Society of Enrolled Agents and the National Association of Tax Professionals. Dave frequently contributes tax tips and information to news publications, including US News and World Report, USA Today, and CPA Practice Advisor. Dave is an Enrolled Agent who has prepared thousands of returns during his career and has trained and mentored hundreds of tax professionals. He is a member of the National Association of Tax Professionals, the National Association of Enrolled Agents and the California Society of Enrolled Agents. Dave also holds a Master of Arts in Education and has been educating people since 1972. 


 

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