New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

George Saenz, the Bankrate.com Tax Talk columnistJuggling the sale of a 2nd house

Dear Tax Talk,
I bought a new house in 2004 and sold in 2005 due to job relocation. Although I did not stay in the house for at least two years, I did not have to pay tax on the gain (approximately $80,000) because of job relocation.

Prior to purchasing the new house in 2004, I bought a house in 2001 and stayed there as my primary residence until 2004. This house has been rented since 2004. I'm thinking about selling the rental house and want to know if I have to wait exactly two years since the sale of my new house in October 2005 (i.e., sell the house in October 2007) in order to avoid paying tax on the $250,000 gain for a single person. I did not use the full $250,000 exemption from the sale of the new house because I stayed there for only a year. Therefore, I thought maybe the two-year gap for the sales between two primary residences can be reduced to one year in this case. Thanks for your advice!
-- Maria

- advertisement -

Dear Maria,
The general rule is that you can only exclude gain from a residence once every two years. One exception to this rule is a sale pursuant to job relocation. However, under the Internal Revenue Service regulations, the two-year rule is waived for the job relocation home and not the second home sold within two years of that sale. In other words, you have the order of the sales reversed. Therefore, you need to hold on to that second home for two years beyond the sale of the first home.

Alternatively, if you need to sell the rental property before the two years have elapsed, and the gain will be greater than the relocation home, you can amend the return for the year you claimed the exclusion on the relocation home. This way you can claim the exclusion on the rental property to maximize your tax savings.

To ask a question on Tax Talk, go to the "Ask the Experts" page, and select "taxes" as the topic.

Bankrate.com's corrections policy -- Posted: Aug. 4, 2006
Read more Tax Adviser columns Ask a question
 RESOURCES
Filing an amended return
Computing capital gains on home sale
Juggling two homes and capital gains taxes
 TOP TAX STORIES
June 15 filing deadline for some
Find the tax professional who's right for you
Coming up with tax cash


Compare Rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 4.45%
48 month new car loan 3.77%
1 yr CD 0.89%
Rates may include points
Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?
VIEW MORE CALCULATORS
- advertisement -
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.