Untaxed Capital Gains

[Brady Ascheman]

Hi everyone, I was listening to the bigger pockets podcast and I thought I heard Brandon Turner say that if you flip a house that you own as your primary home for two years that the gain you make on the sale is untaxed? Can anybody verify this or did I hear him wrong?

[Bill Brandt]

If it was your primary first, and you lived in it the entire time as your primary, the first $250k (single) or $500k (married) of gains are tax free. If it was your primary first and 2 of the last 5 years you’ll only owe depreciation recapture. If it was a rental  first and you lived in it 2 of the last 5 years then you only get the percent of time it was your primary tax free. 

[Basit Siddiqi]

Section 121 exclusion - Allows you to exclude $250,000  / $500,000(if married) if you own and live in the house for 2 out of the last 5 years.
Potential taxes may result if your gain is higher than the above amounts or you treated the property as a rental at anytime.