AboutCarole Dunton Expertise Preparation of individual income tax returns including social security, pensions, lump sum distributions, sale of personal residence, stock and mutual fund sales, distributions from individual retirement accounts, moving expenses and itemized deductions.
General knowledge of schedule C for small sole proprietorships.
No experience in corporate, estate, partnership or large business returns.
Experience 9 years as tax preparer for major national firm.
Question Dear Carole,
My wife and I have a house we have owned and been living in it for 18 years. We just bought a condo and will move over there as our primary residence. We plan to sell our first house as soon as possible. We have a couple of questions due to the housing market:
1)Do we qualify for the gain exclusion if it takes one or two years to sell our first house, assuming we leave it unoccupied?
2) What if we rent it out for a while, say two years, and then sell it, do we still qualify for the exclusion?
Look forward to your expert advice.
Many thanks in advance.
Jeff
Answer Hi,
As long as you have owned and lived in it as your main home for 2 years preceding the date of sale, you can exclude $250,000 gain ($500,000 if married filing jointly).
If you decide to rent it you could still exclude gain under the guidelines above but when you rent it one of your expenses is depreciation on the home, not the land. Be sure to take a deduction for depreciation because when you sell it the sale will be treated as though you had taken depreciation even if you didn't actually claim it. The amount of gain attributable to depreciation will be taxed at a higher rate (25% now but Congress could change that).
