paid cash for home. (foreclosure) did upgrades. (80,000. worth.) I've owned the house for 1 year. I need to move for a few reasons. I want to get a smaller home. so, the majority of the funds will go into it. There is probably a 40-50thousand dollar gain. That's after upgrades.
If you lived in the house for 1 year as your principal residence and you are single and you didn't exclude gain from a sale of a principal residence in the two years prior to the sale, you should be able to exclude up to $125,000 of gain Under § 121. If you lived in the house for less than a year then you can exclude an amount proportional to the ratio of the time you lived there bears to two years time $250,000. You should discuss this with a tax attorney and give him or her all of the details and confirm this before you sell your property.
You might qualify for a Reduced Maximum Exclusion of gains on the sale of your principal residence if your move was for a change in place of employment, health, or unforeseen circumstances and you have not used the gains exclusion in the last two years.
The reduced maximum exclusion is calculated by dividing the number of days you lived in the home by the number of days in 24 months. Multiply the resulting decimal by the maximum exclusion amount - $500,000 if married filing jointly.
For example, if you are single, your reason for moving meets one of the specified criteria, and you lived in the house 365 days then your reduced maximum exclusion would be calculated as follows:
365/730 x $250,000 = $125,000
*NOTE that qualifying for the reduced maximum exclusion is very fact specific. To ensure your best chance at getting the exclusion, contact a qualified tax professional.
This content is not legal advice and it does not create an attorney client relationship. This content is provided for educational purposes only. If you need answers to specific legal problems, please engage an attorney. This content is not intended or written to be used, and cannot be used, for the purpose of avoiding federal tax penalties.