Question about capital gains

[Noel Miles]

Hi Hive,

I'm looking to understand and educate myself more about how capital gains work. I have a property that I bought almost 5 years ago and I lived in it for 2years but in order to avoid the capital gains I feel I have to sell before my 5 year mark is up. Is there a way I can hold on to the property and claim the 2 year exclusion from capital gains? or must I be forced to sell after the 5 years to avoid the capital gains? I think I saw somewhere you could file every 2 years after and be fine but I don't know enough about it, any tax professionals or seasoned real estate investors have ideas I'd really appreciate the education and knowledge on this as a novice. Thanks in advance for the help.

[Bill B.]

If it is a rental before your 2 out of 5 years you do not get a 100% exemption, you only get the percent it was your primary. (If it’s a rental for a year and then you live in it 4 years you only get 80% tax free.)  If it was your primary first then you have to have lived in it 2 out of the last 5. The reason you can “use it every 2 years” is you can sell and move in to a new primary and repeat the procedure.