Hey Dave,
My husband and I bought a home recently. We then sold the other house we were in a few months later. Will the profit we made on the house we sold be taxed if we do not roll it into the new house?
Bev
Bev,
Congratulations on the purchase of your new home. The rule regarding deferral of taxes when the profit on a home sale is rolled into a new home has not been around for quite some time.
The current rule allows you and your husband to exclude from your income up to $250,000 each on the gain from the sale of your primary residence. Therefore, the exclusion is $500,000 if you file jointly. If you lived in your previous residence for at least 2 years (actually, the code reads 2 out of the last 5 years, and the two years do not need to be consecutive), and neither of you have excluded similar gain in the previous two years, you are likely eligible.
If you owned and lived in your previous home for less than two years but were forced to move for a health-related issue or an unforeseeable event such as a death or divorce, you may be eligible for a reduced exclusion. Further information can be found in IRS Publication 523.
Best of luck in your new home.
Dave