Capital Gains Tax Expanded
The new exemption allows taxpayer's to sell their principal residence and incur a tax-free gain of up to $250,000 for single people and $500,000 for couples filing jointly (if you meet the requirements).
To qualify for the tax break, you have to own and occupy the home as your principal residence for at least two of the past five years prior to the sale.
The IRS has released rules that will be good news for many taxpayers. The new rules define the "unforeseen circumstances" that will allow taxpayers to qualify for at least a partial tax break when they sell their principle residence before meeting the two-year requirement.
A few are:
A natural or man-made disaster or act of war or terrorism damages your home.
You lose your job or are transferred.
The sale is a result of divorce or legal separation.
You can no longer afford the mortgage payments due to a change in employment status.
The home sale is necessary due to multiple births from the same pregnancy.
If you sell your principal residence and incur a gain you will have cash for the spending, so long as you have occupied the home for at least two of the past five years.
If the sale results in a gain greater than $250,000 or $500,000 for couples filling jointly, there could be a tax consequence.
Be sure to consult with your CPA to clarify.
Is this the same information published Dec 2002 or something new? The 2002 regulation was much more broad.
Does this information come from common law or a recent regulation?
Answered my own question:
http://www.irs.gov/pub/irs-regs/td_9152.pdf