- December 1, 2023
- Posted by: legaleseblogger
- Category: Related News
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Title: Selling a Home After Early Separation: Seeking Guidance
Introduction
My wife and I, both active-duty military members, purchased our home in California in February 2021. We resided in the property for approximately 15 months before our circumstances changed. In 2022, my wife was granted early separation due to pregnancy-related reasons, and I transitioned to a Skillbridge program in another state. This transition ultimately led to our decision to rent out the property, followed by the eventual sale of the home in June 2023, resulting in a profit of approximately 105k.
Exploring Exemption Eligibility
Given the unique circumstances surrounding the sale of our home, particularly in relation to our military service and early separation, we are unsure about whether we qualify for any exemptions or special considerations in terms of tax implications. We are seeking guidance from others who may have experienced a similar situation or have knowledge of the specific exemptions that may apply to us.
How AI Legalese Decoder Can Help
In this complex scenario, determining the eligibility for exemptions and understanding the legal implications can be overwhelming. AI Legalese Decoder offers a valuable solution by providing a streamlined and efficient way to decipher complex legal language, including tax laws and regulations related to military personnel. By utilizing this tool, we can gain a clearer understanding of any potential exemptions or tax benefits that may apply to our situation, enabling us to make informed decisions and navigate the process with confidence. We can input legal documents and receive simplified interpretations, allowing us to effectively manage the complexities of our unique circumstances and ensure we are in compliance with applicable laws and regulations.
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****** just grabbed a
The rule is typically you have to have used it as your primary residence for 2 years out of the last 5 years before the sale date, but there are some abilities to use a partial exclusion when you were required to move for employment with certain minimums on distance. Check out the IRS pub for it and see if something fits. Any depreciation you did take or should have taken while it was a rental gets recaptured as taxable when you file though, so that is the one piece you really cannot get out of. The IRS really only cares about profit after all of the sale expenses though, so make sure to reduce it, any good tax software should ask about fees on the sale. https://www.irs.gov/publications/p523#en_US_2022_publink100073097
Probably not I think the rule is 2 years as the primary residence… Your best bet would have been to move back for another year, or work with an attorney for a 1031 exchange (but that had to be set up before the sale).
Sorry, bro.
The good news is, it should be long term capital gains which isn’t as bad as short term, and if you still have the money accessible, you can probably max out your traditional IRAs and 401Ks. That should help lessen the blow a bit more.
Also, profit before fees shouldn’t matter since fees are an expense. If you paid $50k in fees, then you’re only tab liable for the remaining ~$50k.
Keep in mind, you probably depreciated the property value to offset taxes in rental income… What you think as “profit” also needs to recapture depreciated value.
I’d strongly suggest you get help with your taxes this year.
The rule is you have to have live in it as your primary residence for atleast two years, so unfortunately you donÔÇÖt qualify
So, it’s two of the last five years, but with the exemption for PCS moves, you still don’t necessarily get to just ignore capital gains, but it is a percentage of how long of 2 of the last 5 you did live there. So, 15 out of the required 24 months, you’d still get to exempt about $312,500 in profit, so it would cover your profit. You should still qualify for the partial exemption because your work moved you more than 50 miles from your residence. IRS explains it here: https://www.irs.gov/publications/p523
Have you looked at a 1031 Exchange?
So all the people in here saying 2 years are wrong. ItÔÇÖs prorated with the max exclusion being if you lived there for 2 years. I sold a house that we lived in for 20 months. The total exclusion for us would have been $500k. But the prorated for not living there the entire time was 20/24 *$500 or about $416k. We were dual military too. Anyways my profit was well under that lowered amount so I was able to avoid capital gains taxes on the entire amount. I was also able to avoid state withholding at closing by filing a state form showing the math.
I believe your situation should count since separations are treated the same way as a PCS.