121 tax exemption questions

[Account Closed]

I've searched the internet & bp but didn't find the specific answers. I understand the 250k exemption for a single filer. My questions are can rehab costs be included with the purchase cost of the next home? Materials & labor? Does it have to be contracted out or can it be done in house? The time frame to purchase the next house? 1 year from time of sale? Or is it within the calendar year. Any other gotchas to look out for? TIA

[Natalie Kolodij]

For the 121 exclusion you don't need to buy a new home. That's not a requriement at all. 

If you bought at $200k  and sell at $750k you have $550k of gain. 

This will be reduced by: 

Costs you spend renovating your house- you can include all material costs and any paid labor (but can't include a cost of your time)

Selling costs on the sale of the house

If you're married you can exclude $500k of that $550k gain 

If you're single or MFS you can exclude $250k 

That's assuming you both owned and occupeid it for 24 months out of the last 5 years. That's all that's required. 

The remaining gain above that is taxable regarldess of how the proceeds are utilized.