John M. Hoffman & Associates CPAs

Frequently Asked Tax Questions

Selling your home? 

 

"Can I do this more than once, or just once in my lifetime?" 

You can do this every two years. The old once in a lifetime exclusion went away sometime around 1997.  

So let’s say that you and Muffie sell your Beacon Hill condo (principal residence) that you bought five years ago for $600,000 for a cool $1,000,000. That gain of $400,000 is excluded from tax (federal and most states – Massachusetts for sure).

The "old rule", then allowed:

You then relocate to your home on Cape Cod that you bought ten years ago for $250,000. Three years from now you decide to retire to Florida and you sell the Cape Cod home for a sweet $700,000. That gain of $450,000 is (WAS) also free of tax. And, yes, you are correct, you may well (COULD HAVE - PAST TENSE) do this two years later with the Florida home.

PLEASE NOTE THAT THIS HAS BEEN CHANGED!

The "new 2008 rule" states that:

The amount of the gain allocated to periods of disqualified use (periods when for example the home was a vacation home or a rental property) does not qualify for the exclusion. The government was very generous with transition rules in this area by only counting only non qualified use periods after December 31, 2008.

With that in mind, the Cape Cod example above would still work, provided that you and Muffie made that Cape Cod home your principal residence before January 1, 2009.

This is an important area that significant dollars can be at stake. Should you have questions or concerns, we suggest that you contact us.