Questions About Home Sale Exclusion from Capital Gains Tax

[Abe Sampson]

I have a couple questions related to the tax benefit of selling a home you've lived in for 2 of the last 5 years.

1. If there are two names on the title of the house, do both of the owners need to live in the house to receive this tax benefit?

2. I read that it is possible to receive a lesser tax exclusion if you live in the house less than two years (1 year means you could exclude 50% of the $250,000 max).  Do you still need to own the home for at least two years to get this tax exclusion?

Thanks in advance!

[Ashish Acharya]

@Abe Sampson, 

Who is the second person ? 

If it’s a spouse, one spouse can meet ownership test of two years, but both of your have to live in the house for 2 years. If so, you can exclude 500k.

If  not spouses,  unmarried co owner can also exclude 250k each if both meet all the requirements of sec 121.

If your gain is not above 250k, only once spouse can meet the requirement and exclude the gain of 250k. 

Yes there is partial exclusion available but you need to meet either employment, health, or unforeseen circumstances. For partial exclusion, you do not have to own the house for two years or live on it. Don’t want to give you the detail calulations formula without knowing what’s going on with you primary residence. 

More info would help.