Question

I have a question about capital gains tax exemption. If I had to sell my house to relocate for a new job, can I exclude my capital gains?

Answer

If you meet the conditions for a capital gains tax exemption, you can exclude up to $250,000 of gain on the sale of your main home. Certain joint returns can exclude up to $500,000 of gain. You must meet all these requirements to qualify for a capital gains tax exemption:

  • You must have owned the home for a period of at least two years during the five years ending on the date of the sale.
  • You must have used it as your main home for at least two years during the past five-year period after the sale or exchange.
  • You can’t have used the exclusion for any home sold or exchanged during the two-year period. This period ends on the date of the current sale or exchange.

If you don’t qualify for the full capital gains tax exemption exclusion, you’ll be able to get a reduced exclusion with an exception. There’s an exception if all of these apply:

  • You sold the home due to a change in employment.
  • You didn’t meet the ownership and use tests.

This applies if you started work with a new employer or continue working with the same one in at a different place. It also can mean the start or continuation of self-employment.

If the change occurred when you used the home as your main home, this can be considered the reason you sold your home. Your new place of employment must be at least 50 miles farther from your former home than was your former place of employment.

Get more information about capital gains tax on home sales.

Related Topics

Related Resources

Garage Sale Money and Capital Gains: What You Should Report to the IRS

Do capital gains apply to garage sale money? The answer depends on a number of factors. Learn more at H&R Block.

For Pro Golfers, Tough Taxes Are Par for the Course

Professional golfer taxes can be complicated and confusing. Learn more about tricky golfer tax issues like travel deductions and residency rules with H&R Block.

How Renting Out Your Extra Bedrooms Affects Your Taxes

Thinking about renting out a room in your home? Learn more about the potential tax implications with the experts at H&R Block.

How do I calculate taxable income?

Finding your taxable income is an important part of filing taxes. Learn how to calculate your taxable income with help from the experts at H&R Block.