Primary Residence and Taxes on Capital Gains

[Debora Monteiro]

Ok, so as a first time potential seller and novice investor-I just learned that if my I lived in my home for 2 of past 5 years I may not have to pay capital gains when I sell. I bought my two family back in 2008. It has appreciated about 100k-130k. Paying taxes on this would be a significant chunk and if I can avoid it I'm going to try to do so. Now, I moved out of this property in Sept of 2014 it is now Sept of 2018 so if I moved back now I technically would be living there 2 out of the past 5 years if I sell in 2019.  I'm not entirely sure if this is accurate information and want to be well-informed before moving back as I don't want to but will if it means I'll save $30-40k. Can anyone shed some light on this? Thank you in advance :)

[Wayne Brooks]

Not exactly:

If you moved out in 09-14 and you move back in now, until 09-19, that year up until 09-14 drops off as it wouldn’t be within 5 years.

Also, since you lost the 121 exemption in 09-17, if you moved back in for the 2 years you’d need, you wouldn’t get the full exemption.....it would be prorated based on the number of years you did occupy verses those you didn't.

In your case, at 09-20, it would be about a 2/3 exemption (8 years verses 4).

Also important, the 121 exclusion only applies to the Half you lived in.....the other half is treated like an investment property.

You’re also going to have depreciation recapture on the other half, plus your half while it was a rental.