Contrary to what many home sellers mistakenly believe, exclusions aren’t one-time opportunities and, moreover, they can avail themselves of the exclusions as often as every two years.
The Internal Revenue Code Section 121 authorizes “exclusions” that allow home sellers to sidestep income taxes on most of their profits when they unload their principal residences.
The exclusions are as much as $500,000 for married couples who file joint returns and $250,000 for single filers and couples who file separate returns.
The Tax Cuts and Jobs Act that Congress passed in December of 2017 made no changes to the exclusion amounts. The law allows a seller to qualify for the exclusion only if they satisfy two requirements:
- The seller has owned and lived in the property as her principal residence or main home for at least two years out of the five-year period that ends on the date of sale.
- The seller can’t have excluded the gain on the sale of another principal residence within the two years that precede the sale date.
About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.