Owner Occupied For 17 Months
I am ready to sell my house. I was told that in California I would not have to pay any capitial gains tax because It is my first home which I have occupied for the last 17 months. Is this true.
In general, this is not true for your federal income tax return.
You will have to check your state revenue codes to determine if this is true for your state return.
This is partially true. For Federal Tax, you must live in the home for 2 of the last five years to qualify for section 121 and pay no capital gains up to $250,000 single, or $500,000 Married Filing Jointly.
Since you did live there 17 months, part of the gain will be tax free and part of the gain will be taxable. If it takes you 2 or 3 months to sell, you will have lived there longer and even less will be taxable.
If you want to know how much, contact a tax professional. H&R Block is a very qualified firm to answer such tax questions and their fees are quite reasonable.
Quote:Since you did live there 17 months, part of the gain will be tax free and part of the gain will be taxable. If it takes you 2 or 3 months to sell, you will have lived there longer and even less will be taxable. melissa,
You can not automatically prorate the capital gain exclusion. There are exceptions to the two year rule that allow the taxpayer to prorate the exclusion. These exceptions are related to certain life events that must precipitate the sale of the primary residence before the taxpayer has satisfied the two year rule.
Selling just because you are ready to sell is not one of the exceptions. In the absence of any financial hardship, job relocation, or medical necessity, the profit on the sale of your primary residence is fully taxable when the two year rule has not been satisfied.