Capital Gain Exclusion

[atkinson40]

Jurisdiction

California

I bought and occupied a property in August of 1989. I lived there as my principle residence for 9 years from 1989 to 1997.

I rented the property for 22 years from 1997 to 2019. I have remodeled the property and would like to sell it.

I would like to move back into the property for 2 years to take advantage of at least partial $500000 capital tax gain exclusion for my wife and myself.

Am I interpreting the law correctly in that at the end of 2 years occupancy, I will only be able to take advantage of 11/33 of $500000 or $166666 as a capital gain exclusion due to "nonqualified use"?

Thanks Kevin

 

[atkinson40]

I bought and occupied a property in August of 1989. I lived there as my principle residence for 9 years from 1989 to 1997.

I rented the property for 22 years from 1997 to 2019. I have remodeled the property and would like to sell it.

I would like to move back into the property for 2 years to take advantage of at least partial $500000 capital tax gain exclusion for my wife and myself.

Am I interpreting the law correctly in that at the end of 2 years occupancy, I will only be able to take advantage of 11/33 of $500000 or $166666 as a capital gain exclusion due to "nonqualified use"?

Thanks Kevin

I just reread the law and see that only time after 2009 is "nonqualifted use" so the ratio would be 22/32 0f $500000 or $343750.

 

[adjusterjack]

Use the worksheet explained on page 13:

2021 Publication 523 (irs.gov)

 

[Tax Counsel]

Use the worksheet explained on page 13:

2021 Publication 523 (irs.gov)

The worksheet itself is on page 15 of that publication.

 

[atkinson40]

The worksheet itself is on page 15 of that publication.

Thank You adjusterjack,

I actually need to do this twice. I currently live in a house I bought and moved to while renting the other house.

I paid off the $200000 purchase price, but now don't want to deal with a pool and an acre of land anymore. The price of this house is now 1.7 million. I will be able to use the whole $500000 exclusion on this house.

My plan is to down size to the rental and prepare this current house for sale while I live in the rental.

I will most likely end up with over 1 million after paying taxes and closing.

After 2 years primary residence in rental, I will sell it also and buy a no pool and no yard residence. The rental is worth $600000. I think I'll end up with $50000 from this sale after taxes and closing.

The rental is perfect for me, but the neighborhood is not the best.

I know 1,5 million may sound like a lot to be able to have to spend on a new house...but not so much in southern california.

Thank You