We hit "the jackpot" and don't want to pay for it!

[Kyle Gilbert]

First thing- my phone will not let me upload my personal info or add a picture but I will work on that. Secondly- My wife and I have had the opportunity to sell our property to a developer. We have a signed purchase agreement (looked over by our attorney) and we will be closing in a couple of months. We bought the house and 1 acre for $62k in October 2011. I've put about $30k into the house. We moved into a different project house for 1 year (now rented!) and recently moved back into the subject property. We are selling it for $225,000. If I read the IRS's website correctly, we should be ok on Capitol Gains Taxes. Is this true or will we be writing a very big check to the government? Should we look into a 1031? I'm a little nervous! That's a $30,000 check!!! Thank you for any advice!

[Jeff F.]

@Kyle Gilbert -

I believe you're exempted from capital gains through real estate due to the fact that you've been living in it. From the IRS: 

Qualifying for the Exclusion

In general, to qualify for the exclusion, you must meet both the ownership test and the use test. You're eligible for the Section 121 exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Refer to Publication 523 for the complete eligibility requirements, limitations on the exclusion amount, and exceptions to the two-year rule.

https://www.irs.gov/taxtopics/tc701.html