Avoiding Capital Gains Tax on Home Sale
Many military families buy a home knowing they'll have to sell it in their next PCS move, so it pays to know about capital gains tax.
If you make a profit in the sale of your home, you can generally avoid paying capital gains taxes on up to $250,000 of that profit, or $500,000 if married filing jointly, every two years.
June Walbert, a Certified Financial Planner practitioner with USAA, says you can take this exemption an unlimited number of times, as long as you:
** Owned the home for at least two years.
** And lived in that home for at least two of the last five years. The two years living there doesn't have to be in sequence.
There are some special considerations for the military, too.
If you rented the home to others because you were on "qualified extended duty" with the military you can "suspend" that period of time in the capital gains calculation for "the last five years" timeframe. But, a suspension period can't be more than 10 years.
If you rented out your place for a reason other than moving under government orders, you still might qualify for a partial exclusion if you are now moving because of a permanent change of station. As with all things tax related, consult your tax adviser.
-- Courtesy of USAA