Documents needed for ”2 out of 5 years” home sales tax exclusion

[Animesh Das]

Hello, I sold my condo last week. I lived in that condo from 2012-2017. So I satisfy the “2 out of 5 years” rule that allows the home sales profit from capital gains tax exclusion. I was wondering what documents do I need to submit when filing taxes for 2018. My tax person says that no documents need to be submitted to prove that, and me just claiming It is enough. Looking for second opinion. Thanks, Animesh

[Michael Plaks]

Originally posted by @Animesh Das:

@Michael Plaks I had rented out the unit after I moved out. Also I made a profit of 370k on the sale. I file taxes as married filing jointly.

So looks like I don't need to report it.

@Basit Siddiqi Thanks

As married filing jointly, you have a $500k exclusion, so there's no capital gain tax for you.

However, because you rented it out, you do need to report the sale and pay tax on depreciation taken during these few months. Even if you did not take depreciation, you owe the depreciation recapture tax.

The IRS probably will not catch you if you ignore this rule and do not report anything - however by the rules, you should.