"If you've been wondering how long you have to buy a house after selling one to avoid a tax penalty, you're dealing with a widely circulated, but outdated belief. The idea that you must purchase another home within a specified window after selling your current one in order to avoid taxes is no longer accurate. Rather than focusing on a deadline for buying another house, current U.S. tax law hinges on how long you owned and lived in the home you sold."
"Under the 121 home sale exclusion, to claim the full exclusion, you must satisfy two tests: Ownership test: You must have owned the home for at least 2 years (i.e., 24 months) during the 5 years prior to the date of sale. Use test: You must have used the home as your principal residence for at least 2 years in that same five-year window."
Modern U.S. tax law does not require buying another home within a set timeframe after selling a primary residence to avoid tax. Eligibility for exclusion of capital gains depends on meeting the 2-out-of-5-year rule under Internal Revenue Code Section 121. The rule requires two tests: an ownership test—own the home at least 2 years (24 months) during the five years before sale—and a use test—use the home as principal residence at least 2 years within that same window. The two years need not be consecutive; nonconsecutive occupancy that totals 24 months qualifies.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
Unable to calculate read time
Collection
[
|
...
]