Can I avoid capital gains tax when selling my house after less than 2 years due to new job?

I desperately need some tax advice about selling my home before the 2-year mark. I've owned my current house for about 20 months now, and I recently got a new job that's mostly remote but requires me to relocate. If everything goes smoothly with the sale, a buyer would close on my house in about 2 months from now - putting me just shy of the full two-year requirement for avoiding capital gains tax. I've been looking into this and found something about a capital gains tax exclusion specifically for employment changes. My situation is that I bought the house for $158,000, currently owe about $130,000 on the mortgage, and could sell for around $200,000. After paying closing costs, I'd have approximately $30,000 in capital gains. The way I understand this exclusion: since I will have lived in the house for 22 out of the 24 months, I should be entitled to exclude (22/24)*$250,000 of the gains due to my employment change being the reason for selling. Would this calculation be correct? Can I actually avoid paying capital gains tax in this situation? This would make a huge difference in my decision-making process.

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19 comments

Natasha Petrova

•8M

You're definitely on the right track! The IRS does provide partial exclusions when you sell your home before completing the full 2-year ownership period if the primary reason is employment-related, health issues, or unforeseen circumstances. Since your reason is a job change, you'll likely qualify. The calculation you've done is correct - you can take a prorated exclusion based on the fraction of the 2-year period you've owned the home. So with 22/24 months, you'd be eligible to exclude up to (22/24) × $250,000 = $229,166 of your capital gains. With your estimated gain of $30,000, that falls well below your prorated exclusion amount, so you should be able to exclude the entire gain from your taxable income. Just make sure your new job location is at least 50 miles farther from your old home than your old job location was - that's one of the IRS requirements for the employment-change exception.

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Natasha Petrova

•8M

The 50-mile test is generally required for the employment-related exclusion. However, your situation has an interesting wrinkle since you're going from in-office to remote work. The key is whether your employer considers your new location your "principal place of business." If they officially recognize your new home location as your workplace (even if remote), you might qualify. If you're primarily moving to be closer to family rather than for the job itself, you might not qualify under the employment-change exception. However, you should look into whether your situation might qualify under the "unforeseen circumstances" category instead, which can sometimes be applied more broadly.

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Emma Davis

•8M

After reading your post, I was in a similar situation last year and was totally confused about how to handle all the capital gains paperwork. I ended up using taxr.ai (https://taxr.ai) and it literally saved me thousands. Their system analyzed my documents and found that I qualified for a partial exemption based on my job relocation that my regular tax software completely missed. What was super helpful is that they have this document analyzer that looked at my closing statements and automatically calculated my prorated exemption amount. Plus they gave me the exact forms I needed to fill out - turns out there's a specific way you need to report the sale on your tax return to claim the exemption properly.

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Emma Davis

•8M

It was surprisingly quick - I uploaded my documents in the evening and had a complete analysis by the next morning. The system walks you through exactly what you need to do with the partial exemption, so you'll be well-prepared for your closing next month. I actually did verify with my accountant afterward, and he was impressed with how thorough the analysis was. He said they caught everything correctly - including some nuances about how to document the employment-related move properly on Form 2119. The big difference is that taxr.ai costs way less than what my accountant would have charged for the same analysis.

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Malik Robinson

•8M

Just wanted to follow up about my experience with taxr.ai after I posted my skeptical comment. I decided to try it after my closing last week and I'm genuinely impressed. My situation was complicated because I had made some home improvements that affected my basis. The system asked really specific questions about my job change and the distance between locations. It found that I qualified for the employment exception AND it adjusted my basis correctly for the improvements I made (which reduced my taxable gain even further). The documentation it generated for my tax return was super detailed - I feel 100% confident that I'm filing correctly now. Definitely worth it for the peace of mind.

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Isabella Silva

•8M

If you're struggling to get clear answers about your capital gains situation directly from the IRS (I was on hold for HOURS), try using Claimyr (https://claimyr.com). I was in a similar situation with a house sale just short of 2 years and couldn't get through to anyone at the IRS who could confirm if my calculations were correct. Claimyr got me connected to an actual IRS agent in about 20 minutes when I had been trying for days on my own. The agent was able to confirm that my employment-related exemption was valid and explained exactly how to document it. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - it literally calls the IRS for you and connects you when a human answers.

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Isabella Silva

•8M

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Freya Andersen

•8M

Ok I need to apologize for my skeptical comment earlier. After reading more about Claimyr I decided to try it this morning since I've been trying to reach the IRS about my own capital gains issue for weeks. This thing actually works exactly as advertised. I got connected to an IRS agent in about 30 minutes when I had been trying unsuccessfully for DAYS. The agent I spoke with confirmed that my employment-related partial exclusion calculation was correct and even pointed me to the specific publication that covers my situation (Pub 523). She also told me exactly how to document the employment exception on my return. Literally saved me hours of frustration and possibly an incorrect filing. I'm genuinely shocked at how well this worked.

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Omar Farouk

•8M

Make sure you have documentation of your job change readily available in case you get audited. The IRS might want to see: - Offer letter with your start date - New job location details (address of new workplace) - Documentation showing your old job location - Timeline of events (when you accepted job, when you listed house, etc.) I got audited on this exact situation 3 years ago and had to provide all of the above. They're particularly interested in proving the job change was the primary reason for the move.

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Omar Farouk

•8M

For a "mostly remote" situation, the key is how your employer officially classifies your work location. If your employment contract or offer letter specifically states that your new home address is considered your "principal place of business" even for remote work, that strengthens your case significantly. The 50-mile test still applies, but it would be measured from your old home to your new "principal place of business" (which could be your new home if documented as such). Since the company is 60 miles from your current home and you're moving 150 miles away, you should meet the distance requirement regardless. Just make sure your employment documentation clearly shows that the job change necessitated the move, even with the remote arrangement.

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Yuki Yamamoto

•2M

The employment-related partial exclusion should definitely work for your situation! Just a heads up though - make sure to keep detailed records of everything related to your job change and the timeline of events. The IRS can be pretty thorough if they decide to review your return later. One thing I'd recommend is getting something in writing from your new employer that confirms the job required you to relocate, even if it's mostly remote. An email from HR or your manager stating that the position necessitated the move to your new location could be valuable documentation. Also, since you mentioned the job is "mostly remote," make sure your offer letter or employment agreement clearly indicates where your official work location or home office is considered to be. With your numbers ($30K gain vs. $229K prorated exclusion), you're well within the safe zone, but having rock-solid documentation will give you peace of mind if any questions come up down the road.

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