The IRS typically ALLOWS you to EXCLUDE up to:
• $250,000 of capital gains on real estate if you’re single.
• $500,000 of capital gains on real estate if you’re married and filing jointly.
But your $250,000 or $500,000 exclusion typically DOES NOT APPLY,
which means you pay tax on the whole gain, IF ANY of THESE FACTORS are true:
• The house wasn’t your PRINCIPAL RESIDENCE.
• You OWNED the property for LESS THAN TWO YEARS in the FIVE YEAR PERIOD before you sold it.
• You DIDN’T LIVE in the house for AT LEAST TWO YEARS in the FIVE YEAR PERIOD before you sold it.
– EXCEPTIONS: People who are DISABLED, and people in the MILITARY, FOREIGN SERVICE or INTELLIGENCE COMMUNITY can get a break on this part, though; see IRS Publication 523 for details.
• You ALREADY CLAIMED the $250,000 or $500,000 exclusion on another home in the two-year period before the sale of this home.
• You bought the house through a LIKE-KIND EXCHANGE (basically swapping one investment property for another, also known as a 1031 exchange) in the PAST FIVE YEARS.
• You are subject to EXPATRIATE TAX.
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