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How many years do I need to own a house until I don't have to pay capital gains taxes?

Personal Finance & Money Asked on March 17, 2021

I’ve owned my home for 1.5 years and it has been my primary residence. I decided to move, and want to sell, however, I’m unsure if I have to pay capital gains.

When searching the internet I find conflicting resources. Some say I need to have owned the home for 1 year, others say 2. I’ve even read that if its my first home, I don’t have to pay capital gains regardless of time owned.

I cannot seem to find a straight positive answer, so I am hoping this forum can provide some clarity.

I live in Michigan if that information is needed.

2 Answers

The property must be your primary residence and you must have occupied it for 2 of the last 5 years and make no more than $250,000 in gains if you're single or $500,000 if file joint tax returns with a spouse.

There are exceptions, for instance for members of the armed forces.

Official IRS document regarding this subject: https://www.irs.gov/taxtopics/tc701

I believe everything you need is spelled out in that article and the accompanying link that will take you to the "Exclusion Test" to see if you're eligible for partial gains exclusions: https://www.irs.gov/publications/p523#en_US_2019_publink10008937

Correct answer by BobbyScon on March 17, 2021

How much (percentage) has the home appreciated in 1.5 years?

If you're selling at the same price or less than you bought it then there are no gains to be had and no taxes to be paid.

If you are selling above your purchase price then you can add qualified home improvements which you may have done during your occupancy to your cost basis.

https://www.houselogic.com/finances-taxes/taxes/tax-breaks-capital-improvements-your-home/

If you still feel unsure then talk to a real-estate agent or preferably a real-estate lawyer or even a tax professional.

Answered by MonkeyZeus on March 17, 2021

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