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tala

250K Tax Free - Delayed Sale of Residence

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I will have completed 2 yrs owner occupancy on home in San Diego...in June 06. I'm relocating to Albuquerque and have purchased home over there.

 

Do not need sale here to purchase there.

 

Question: If I do a refinance here then rent it out beginning July, do I suffer any problems on my 250K cap gain if I sell prior to the end of 3 years leaving the residence?

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tala,

 

As long as you will have had two years of ownership AND two years of occupancy as your primary residence during the five years prior to the sale of your primary residence, you qualify for the capital gains exclusion. Putting your home into rental service for a couple of years prior to sale does not affect your eligibility for the capital gains exclusion.

 

Similarly, refinancing your property has no affect upon your income tax treatment. Borrowed money that must be repaid, is not taxable income.

 

If you vacate your primary residence before completing two years of occupancy, you may still qualify for a reduced maximum capital gains exclusion on the sale if the reason for relocation meets one of the allowed exceptions to the two year rules (a change in place of employment, for example).

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You will be fine if you rent out the propety as long as you have owned, treated and lived in the property as your primary residence for 24 months out of the last 60 months.

 

It's what I call the 60 month look-back. You look back 60 months from the date your sale transaction closes and as long as you still satisfy the 24 months out of the last 60 months requirement you are in great shape.

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