Mom looking to sell a house that I own. What's the best strategy to avoid taxes?

[Jerinico Batac]

Hi,

So here's the story, about 4 years ago I had helped my mom get a home loan under my name. The reason was that at the time, she was just starting to establish her business and she couldn't get a good interest rate. Luckily, my work moved me in the area and we decided that we purchase the house under my name and we can all live there. After a year, I was asked again by my company to move back to Maryland so I did. I however, kept the house as my primary residence in Virginia beach still and sent most of my mails there. I rented a place for another 1.5 year before purchasing another house which now became my current primary residence. Recently, my mom had asked me that she plans to sell the property and buy a new one (this time she can buy under her own name since her business has been established). What's the best strategy for us so that we won't have to pay capital gains? I understand that for single filers it's $250k and married filing jointly it'll be $500k. Next year if she sells, I will be filing married filing jointly (granted my soon-to be wife is not in the deed, only me).

Here are the time frames:

8/23/2019 - bought the house virginia beach under my name(loan started)

12/01/2020 - I moved back to maryland due to work and rented however kept virginia beach house as primary residence

12/01/2021 - Bought a house in maryland with my soon to be wife and now claim that as primary residence

Will I be avoiding capital gains if we sell the house since technically it's my primary residence from 8/23/2019 to 12/01/2021? Please advise. Thanks.

[Don Konipol]

Any answer in an online forum SHOULD NOT be relied upon.  Engage a tax specialist accountant or tax attorney.  You get what you pay for

[Maxwell Deal]

Agree with not taking firm advice on here -certainly talk to a professional about your situation.  The very fine details can change the tax situation greatly.  However, I will say (with the above disclaimer) that is sounds like you could qualify for the 2 of 5 rule to avoid cap gain.  Would certainly check into and make sure!

[Jason Young]

Hey there. I just sent you a message. 

[Patti Robertson]

From the dates you gave above, you lived in the home for less than two years. In order to claim the Homestead exemption, you have to have lived in it for two out of the last 5 years.

[Joe Norman]

The IRS generally allows capital gains exceptions if you lived in the house as your primary residence for 2 of the last 5 years. Where were you living during the period of 12/01/2020 to 12/01/2021?  Just sending your mail to Virginia Beach doesn't make that your primary residence, what matters is where you are actually living. If you were living in MD during that time then, unfortunately, it looks like you're paying capital gains.