Primary Residence capital gain exclusion, It's more complicated.
I can paraphrase the rule as: if you live in a house 2 years out of last five years, you will enjoy SOME or ALL of the primary residence capital gain exclusion.
If you lived in a home first for 2 years, and rent for three and sold before 5 years anniversary, the 500K of the capital gain is tax free. THis is true. That's the example in the article.
But that doesn't mean you can enjoy FULL exemption if you live in the house for ANY 2 years out of five. If you first rent a house for three years and then live in it for 2 years, only 2/5 of the capital gain could be tax free.
Essentally, the rule just means if it is your home, IRS gave you three years grace period after you move out to enjoy FULL capital gain exemption. Because during those three years you might find out the new house, new job and new city doesn't fit you and you could go back to your previous home; or you couldn't sell the house immediately due to a down market and you had to rent it out to wait for a better market.
The rule actually said, the non-qualified use period doesn't include any three years period after the two years of primary residence.
Non-qualfied use period = period you have to pay capital gain tax.
Example: primary residence (PR) for 10 years, moved out, rented for 3 years, and then moved back in and lived for 2 years.
ownership perod = 10 + 3 + 2 = 15. non-qualifed use period = 3, therefore 3/15 of the capital gain is taxable.
Example: PR for 10 years, rented for 3 years, PR for another 2 years, then rented for 3 years.
ownershihp period = 18 years, non qualified use period = 3. The final 3 years of rental is not counted as non-qualified use. So only 3/18 is taxable.
This is why I say, there is a three years grace period after two years of primary residence.
Note: the statement of "3/15 of the capital gain is taxable" is a simplification of the actual tax law. The actual law says how much percentage of the 500K exemption you can enjoy. But the logic is too twisted to explain clearly. You need to do the related worksheet to determine the exact amount.
In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale.
I can paraphrase the rule as: if you live in a house 2 years out of last five years, you will enjoy SOME or ALL of the primary residence capital gain exclusion.
If you lived in a home first for 2 years, and rent for three and sold before 5 years anniversary, the 500K of the capital gain is tax free. THis is true. That's the example in the article.
But that doesn't mean you can enjoy FULL exemption if you live in the house for ANY 2 years out of five. If you first rent a house for three years and then live in it for 2 years, only 2/5 of the capital gain could be tax free.
Essentally, the rule just means if it is your home, IRS gave you three years grace period after you move out to enjoy FULL capital gain exemption. Because during those three years you might find out the new house, new job and new city doesn't fit you and you could go back to your previous home; or you couldn't sell the house immediately due to a down market and you had to rent it out to wait for a better market.
非常耐心详细。涉及法律的，还都有出处。我就一直以为住够五年就可以了，看来还有先后顺序。学到了，谢谢！
The rule actually said, the non-qualified use period doesn't include any three years period after the two years of primary residence.
Non-qualfied use period = period you have to pay capital gain tax.
Example: primary residence (PR) for 10 years, moved out, rented for 3 years, and then moved back in and lived for 2 years.
ownership perod = 10 + 3 + 2 = 15. non-qualifed use period = 3, therefore 3/15 of the capital gain is taxable.
Example: PR for 10 years, rented for 3 years, PR for another 2 years, then rented for 3 years.
ownershihp period = 18 years, non qualified use period = 3. The final 3 years of rental is not counted as non-qualified use. So only 3/18 is taxable.
This is why I say, there is a three years grace period after two years of primary residence.
Note: the statement of "3/15 of the capital gain is taxable" is a simplification of the actual tax law. The actual law says how much percentage of the 500K exemption you can enjoy. But the logic is too twisted to explain clearly. You need to do the related worksheet to determine the exact amount.
所以如果租了10年，再住2年，大概也就是2/12可免。并不是以最后5年计算。
以前经常给出处，被鄙视为只会死抄，所以现在我都懒得给了。其实有时候解释清楚很麻烦，找一个网上文章写得比较好的比我直接回答好。
这个自住房免税额，要弄清楚只能看IRS文件，因为各人情况不太一样，网上文章只能给最大众的例子。IRS文件里面例子更多一下。https://www.irs.gov/publications/p523
Qualifying for the Exclusion
In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale.
https://www.irs.gov/taxtopics/tc701#:~:text=You're%20eligible%20for%20the,to%20its%20date%20of%20sale.&text=However%2C%20you%20must%20meet%20both,the%20date%20of%20the%20sale.
You tell me.
新法规执行以前的出租年都不算的不要交proportional capital gains tax的。所以总的15年里只算最近10-11年里该付的capital gains tax。
自住房，最后3年租出去。卖房400万，total capital gain 200万，其中50万免税。然后exchange花350万买另外一个duplex，根据加州的rental exchange rule，是不是可以都不交税？
谢谢
我觉得你不是记仇的性格啊。
廉颇负荆请罪，是因为蔺相如有胸襟有气度。
对这个更新后的规定一直没太理解，今天总算明白了。
step up以后，property tax是按新的market value付的。