Capital Gains Tax Help on Primary Residence

[Hannah Leas]

Hey Bigger Pockets Network,

I purchased a home (first home and primary residence) in August 2016 for $135,000. I put in about $10,000 of renovations. This home was located in Vancouver, WA.

In July 2017 I sold the home for $197,000. I used the profit and bought another property in Portland, OR for $220,000.

Is there anyway I can escape paying the short term capital gains tax or at the very least reduce it? Does the home sale and purchase in different states make a difference? Anyone recommend an accountant in the Portland area?  

Thank you for your help!

[Jake Hottenrott]

@Hannah Leas I'm sorry to say, but it looks like not only did you not qualify for the full exclusion of the gain on your primary home (Pub 523) and that you did not hold it long enough for it to qualify for long term gain tax treatment.  Now for a little bit of potential good news.  You MAY qualify for a reduced exclusion under Pub 523 if the move was for work, health or unforeseen circumstances.  So that moving from state to state would only work if they were more than 50 miles apart (with a few caveats) but my quick google map search shows they are pretty close together.

To reduce that short term gain taxed at your ordinary income tax rate, I highly recommend finding all documentation related to the purchase to establish your basis.  All major renovations that you performed and the receipts and records for those.  As well as, using all eligible expenses from your closing statement that will help to offset that gain.  Good luck!