Primary residence tax exclusion when you sell

[Oliver Martin]

Hi everyone. Just wanted to clarify. If I lived in my primary residence from September 2012- December 2015. And I rent it out from January 2016- December 2017. Do I still qualify for the 250k tax exclusion if I sell it in January 2018? Does it have to be my current primary residence when I sell it to qualify for the tax exclusion? My understanding was you just have to live in your primary residence for 2 out of the last 5 years. You can convert it to rental and as long as you sell it within the 5 year time period you're good. However a financial advisor from a law/tax firm was telling me otherwise. Thanks in advance.

[Dave Toelkes]

Since you have already owned and occupied the house as your primary residence for at least two years of the five years prior to your projected sale date, you are still eligible for the §121 capital gains exclusion provided you sell before the third anniversary of your moveout date (sometime in December 2018), even if you have already established another home as your primary residence.

Just to be clear, the capital gains exclusion is not $250K.  Under the §121 provisions, you can only exclude your actual capital gain up to $250K per taxpayer.  

I would not have any further dealings with the financial advisor you spoke with.