capital gains tax exemption

Hi Torres,

Welcome to Mortgagefit discussion board.

You may not have to pay any tax if you are eligible to claim reduced gain exclusion. You would be eligible to claim reduced gain exclusion on profits from sale if-

• You had to sell the house because of change in place of employment.


• Sold the house due to health reasons or


• Other unforeseen circumstances.

If any of these conditions are satisfied then you would be eligible to claim reduced gain exclusion. The reduced exclusion amount equals the full value $250,000 multiplied by 20/24, where 20 is the no. of months you stayed in the home before selling it divided by 24 or 2 yrs., the time period one needs to stay to claim full deduction.

Do let me know if you have any other questions.

Thanks
Blue

I would like to give you some more information on the eligibility conditions for claiming reduced gain exclusion.

1. A house sale because of change of employment will be considered if the new place of employment is at least 50 miles farther away from this house compared to the distance between the house and previous place of employment. Like, from where the house is, previous office was 50 miles, now the new office is 100 miles.
   
   Even if the 50 mile condition is not met one can be eligible if change of place was for a valid reason. One example would be a situation where you get a new job of an emergency-room worker which requires you to live nearby. In such a situation you would be eligible for the exclusion.



2. If you have to shift to obtain or facilitate diagnosis, cure or treatment of disease, illness or injury for yourself, spouse, any close relative or any descendent of your grandparent (like your first cousin) then it will be considered as change of place because of health reasons. In addition a doctor's recommendation for a change of residence for reasons of health of such person will also be a valid reason for the change.



3. Some of the unforeseen circumstances which can result in change of place-
   
   • Death of your spouse or any other co-owner of the house.
   
   
   • You, your spouse or any other co-owner becomes eligible for unemployment compensation.
   
   
   • Your spouse's or any other co-owner's pregnancy results in multiple births.
   
   
   • Your residence is a casualty of a man-made disaster or act of terrorism.
   
   
   • You, your spouse or any other co-owner gets divorced or legally separated.
   
   
   • Residence is sold after being seized, such as by a government agency.
   
   
   • You, your spouse or any other co-owner experiences a change in employment status or self-employment status because of which you are unable to pay housing costs & other basic living expenses.

Miller

Hi Torres,

I have heard that if a person cannot stay in his property for 2 years out of the 5 years for capital gains tax exemption on account of job relocation, then he can avoid paying the tax.

The job relocation (over 50 miles) is considered as hardship exemption by the Internal Revenue Service to the usual 2 year ownership rule.

Thanks,
James.