The Difference a Day Makes - 1/16/2011
A man was selling a property which was currently rented but had previously been his home for over two years. After discovering it had been rented for the last 2.5 years, it was asked if he had planned on taking the principal residences capital gain exclusion. He said he hoped it would be possible.
When asked if he was aware of the requirement that he must have owned and used the home for two out of the last five years (730 days), he said he knew about it but wasn't sure what it meant. "In this case, it means the home needs to be ready to sell, priced correctly, sold and closed within six months."
The motivation for the seller was simple...minimizing or eliminating the unnecessary payment of taxes. If his gain in the home had been $200,000, not qualifying for the exclusion would cost him $30,000 in long term capital gains tax. It's a big difference and timing is important.
Selling a home for the most money is one thing; protecting your best interests is another. I help people understand the tax advantages, financing alternatives and investment aspects of homeownership.