taxes

Capital gains on home sale due to job change

Judy O'ConnorDear Tax Talk,
I'm closing one month shy of two years since the sale of my last primary residence. Sale of home is due to a job transfer over 400 miles away. I have calculated capital gains of $40,000. Do I have to pay capital gains on a home sale due to a job change? If so, how much? Thanks for your help on these questions.
-- Tom

Dear Tom,
You may be able to reduce the amount of capital gain on the sale of your residence due to your job change even though you do not meet the two-year requirement.

The IRS allows a maximum exclusion of $250,000 of gain ($500,000 for married couples filing joint returns) on the sale of your qualifying residence if you meet the ownership and use tests. The ownership test means you have owned the home for two years. The use test means that over a five-year period ending on the date of sale, you have lived in the home for two years.

If you do not meet the above tests, the IRS also allows a reduced maximum exclusion due to changes in employment, health reasons or other "unforeseen circumstances." The details regarding these categories are covered in IRS Publication 523, Selling Your Home.

 The amazing home-sale tax credit | Human silhouette © Anatoly Tiplyashin/Shutterstock.com

In your situation, you did not meet the two-year test due to your job change. The good news is that you may qualify for a reduced exclusion because your new job location is at least 50 miles farther from your old home.

Now for the hard part: You are going to need to complete work sheets 1, 2 and 3 that are included in Publication 523 in order to calculate your reduced maximum exclusion. I believe you will find it time well spent.

Thanks for your question and best of luck in your new job.

Ask the adviser

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

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement

Show Bankrate's community sharing policy
          Connect with us
REFINANCE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed refi 4.00%  0.09 4.09%
15 year fixed refi 3.08%  0.12 3.20%
10 year fixed refi 3.13%  0.11 3.24%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.32%  0.02 4.30%
50K FICO-based HELOC 3.98%  0.02 3.96%
100K FICO-based HELOC 3.83%  0.02 3.81%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.75% --0.00 2.75%
48 month used car loan 2.99% --0.00 2.99%
60 month new car loan 3.19%  0.01 3.20%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.99% --0.01 0.98%
2 Year CD 1.22%  0.01 1.21%
5 Year CD 1.87% --0.00 1.87%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.76% --0.00 15.76%
Cash Back Cards 16.44% --0.00 16.44%
Low Interest Cards 11.04% --0.00 11.04%
 
Next
advertisement
WEEKLY TAX TIP NEWSLETTER

Our tax expert Kay Bell provides resourceful tips and advice to help you stay prepared for filing.

advertisement
Do you do your holiday shopping online to avoid sales taxes? Enjoy it this year. It could be the last sales-tax-free Cyber Monday.
Partner Center
advertisement

Connect with us