Im active duty military, and am planning on selling one of my homes (Property #1) in the next several months, which meets the 2/5 capital gains tax exclusion criteria of having both owned and lived in it for 2 of the last 5 years prior to selling (and my understanding is that the rule actually extends to 15 years for the military). My tenants in a different property (property #2) have interested in purchasing my home, and we had agreed on a deal several months ago, but at the time, they could not secure financing, so they continued renting. They unexpectedly reached out today and stated they they were close to getting financing, and asked if I’d honor the deal we originally agreed on. I’d meet the 2 of 15 rule (But not 5...I lived there prior to property #1)l and the total capital gains tax would not exceed $250k. However, since the sale would take place around the same time, am I correct in assuming that only one would be exempt? The gains for Property #1 would be significantly bigger, so would I need to sell that one first? Even though both meet the 2 of 10 rule (and I moved out of both due to military re-assignment).

Can you 1031 property 2? thats the first ive heard of the 15 extension to military, im interested to see if that is true as military myself. 

@Sharon Li , I've never heard of the 15 years for military. I'd check with an attorney or CPA about both houses qualifying for the 2/5 year rule.

@Sharon Li @Scott Wolf that is correct, as long as you were moved away from your home due to PCS orders, and are still serving in the military, there is a 10-year extension on the 2/5 capital gains tax ruling. Happy to introduce you to a tax professional who works with service members if you would like more information on the specifics as I can't recall which section of IRS code addresses this.

Originally posted by @David Pere :

@Sharon Li @Scott Wolf that is correct, as long as you were moved away from your home due to PCS orders, and are still serving in the military, there is a 10-year extension on the 2/5 capital gains tax ruling. Happy to introduce you to a tax professional who works with service members if you would like more information on the specifics as I can't recall which section of IRS code addresses this.

 Wow, that's some powerful knowledge.  Sharon, did you leave property one due to PCS orders?  If so, seems like you can hang on to it a bit longer.  And I'd def take David up on his offer for the tax professional.

@Scott Wolf yeah, it is one of my favorite real estate benefits for service members. Super powerful given how much a home could appreciate in 15 years!

Originally posted by @David Pere :

@Scott Wolf yeah, it is one of my favorite real estate benefits for service members. Super powerful given how much a home could appreciate in 15 years!

 Unreal benefit.  Should be shouted from the mountain tops!

Very good to know. I recently heard a rumor that the VA Loan benefit has changed. Previously, a service member was limited to a certain amount of benefit depending on location, say $450,000. You can have multiple VA loans, but in order to receive the benefit the total of the loans had to be below $450,000. I have heard that now you can have multiple loans, up to $450,000, with no limit to total benefit. I find this hard to believe, but its definitely worth looking into.