Help in understanding 2 years stay concept for primary residence
We moved in our house in May 2018 want to take advantage of 2 years of primary residence for tax advantage in CA. No plans of selling now would like to rent it out for couple of years and then decide if I should sell latter. Just want to make sure we complete 2 years before we move out. How are 2 years of stay calculated ? Will we complete 2 years on May 2020 or We will have completed 2 years of Primary residency as of today already ( max time of the year spent) May - Dec 2018 Jan - July 2019 TC : 360k
CA?
Yes
this is not related to CA taxation but instead the IRS. homeowner $250K capital gain exclusion on primary residences
Iâm fairly certain two years needs to be the 2 years leading up to the sale. let me check
iâm wrong, itâs 2 out of 5 year window
itâs called Section 131 exclusion and the details are here https://www.irs.gov/taxtopics/tc701
with 2 out of the 5 years before the sale you should be OK. for a detailed answer, ask a tax professional
however, consider that you will simply be declaring this information on your returns. it up to you to keep records proving you acted within the tax code. if your records are in good order and your story is belieavable (we were here from X time go Y time), and what your claiming looks consident with other people using Section 131, youâre probably FINE and shouldnât worry about it
I recommend you worry about this. The closing agent will remind you that this is a federal filing document, that gets notarized. And asks if you have maintained the unit as your primary residence for 2 of the previous 5 years.
if itâs an investment property you can use Section 1031 to avoid capital gain on investment property, but then the thing you buy has to be an investment too
this is one of the reasons itâs better to not live where you own property
Thanks for the responses. I did not it get your point can you elaborate. I feel otherwise for 1. Staying would help u get better loan rates 2. Benefit of not paying tax on any sale
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