Can I still claim primary residence for capital gains tax with the 2 out of 5 year rule if I've been living overseas?
I'm trying to figure out if we qualify for the primary residence exclusion on capital gains tax with our somewhat unusual living situation. My husband and I purchased our home back in 2016 and lived there continuously until around March 2023, when I accepted a job opportunity in Asia. My husband joined me overseas, but we've maintained our house in the States completely as is - never rented it out to anyone. We've returned to stay in our house several times: my husband was there for about 6 weeks in July/August 2023, I was there for roughly 8 weeks around December 2023/January 2024, and we both stayed there together for about 5 weeks in May 2024 during my company's slow period. Our intention is to sell the house around April 2025 when the market in our area tends to be strongest. We've maintained all our connections to the property - our voter registrations, bank statements, utility accounts, and phone bills still list this address as our primary residence. We even have our mail forwarded to us overseas. I'm wondering if we'll qualify under the 2 out of 5 year rule for excluding capital gains on our primary residence? The property has appreciated quite a bit, and we want to make sure we're not hit with a huge tax bill if we sell. Do our intermittent stays count toward our time of residence?
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Ashley Simian
The 2-out-of-5-year rule means you need to have used the home as your main home for at least 2 years out of the 5-year period ending on the date of sale. Based on your timeline, it sounds like you lived there full-time from 2016 to March 2023, which is well over 2 years within the 5-year window before your planned April 2025 sale. The fact that you've maintained all your connections to the property (voter registration, bank statements, utility bills) and never rented it out strengthens your position that this remained your primary residence despite the overseas assignment. The IRS generally looks at your intent and the totality of circumstances, not just physical presence. Your periodic returns to the property also help demonstrate continued use as a residence. While temporary absences (even long ones) for work assignments are generally considered periods of use as a main home, having documentation of your intent to return is important.
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Oliver Cheng
•Thanks for the reply! One thing I'm confused about though - does the fact that we're overseas most of the time affect this? Like, if we're physically present in another country for work but consider our US house our "real home" will the IRS accept that? Also, does having a rental apartment overseas hurt our case?
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Ashley Simian
•Living overseas for work is generally considered a temporary absence if you intend to return to your main home. The key is that you haven't established another primary residence by buying property elsewhere, and you've maintained all your connections to your US home. Your situation is exactly what these rules were designed to accommodate. Having a rental apartment overseas actually strengthens your case, as it shows your living situation abroad is temporary rather than permanent. The IRS understands that people take extended work assignments without giving up their actual primary residence. Just make sure you don't claim any tax benefits on your overseas housing that would contradict your US primary residence claim.
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Taylor To
I wanted to share my experience with a similar situation. I was struggling with figuring out the primary residence rules when I had to move abroad for work while maintaining my home in the US. I found this tool called taxr.ai (https://taxr.ai) that really helped clarify my situation. It analyzed my specific circumstances with the 2-out-of-5 year rule and gave me a clear breakdown of how the rules applied to my international work assignment. What was super helpful was that it looked at all aspects of maintaining a primary residence - from property tax payments to utility bills to voter registration, just like your situation. The tool specifically addressed the capital gains exclusion qualification with detailed explanations about how temporary absences for work factor in. It saved me from making a costly mistake in my tax planning.
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Ella Cofer
•How exactly does this taxr.ai thing work? Did you have to upload a bunch of documents or something? I'm in a somewhat similar situation except we rented our place out while overseas.
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Kevin Bell
•Is it actually reliable for complicated tax situations? My accountant gave me conflicting advice about this exact issue and I'm not sure who to trust at this point. Did the IRS accept the position you took based on what taxr.ai told you?
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Taylor To
•For the document question, yes, you can upload relevant documents like property tax statements, employment contracts showing temporary assignment, utility bills, etc. The system analyzes them to help determine your situation. It also works without documents by answering detailed questions, but the document analysis gives more precise guidance. Regarding reliability, I found it extremely accurate for my complex situation. My accountant actually revised his initial opinion after seeing the detailed analysis from taxr.ai. The tool cites specific IRS publications and tax court cases relevant to your situation. I filed according to their guidance last year and had no issues with the IRS accepting my position.
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Kevin Bell
I have to follow up about taxr.ai since I was skeptical in my earlier comment. I decided to try it out for my own primary residence question and I'm genuinely impressed. The analysis it provided was incredibly thorough, even pointing out a specific tax court case (Evans v. Commissioner) that was almost identical to my situation with working overseas while maintaining a US home. What really helped me was the specific documentation checklist it generated for my situation - it flagged exactly what records I needed to keep to substantiate my claim for the 2-out-of-5 year rule. My situation had some complications with foreign housing exclusions that my accountant hadn't considered, and the tool caught that potential conflict. I'm much more confident about my position now and have a clear paper trail to back it up if questioned.
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Savannah Glover
For anyone dealing with IRS questions about primary residence or the 2-out-of-5 year rule, I had a similar situation and initially got conflicting information from different IRS representatives. After weeks of frustration trying to get through on the IRS phone lines, I used Claimyr (https://claimyr.com) and got connected to an actual IRS agent in about 15 minutes. The agent was able to review my specific situation and confirm that my overseas work assignment with periodic returns to my US home wouldn't disqualify me from the primary residence exclusion. They went through the exact documentation I needed to keep. You can see how the service works in this video: https://youtu.be/_kiP6q8DX5c I was amazed how quick it was compared to my previous attempts of waiting on hold for hours only to have the call dropped.
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Felix Grigori
•Wait, how does this actually work? You pay someone to wait on hold with the IRS for you? That seems too good to be true given how impossible it is to reach them.
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Felicity Bud
•I'm super skeptical about this. The IRS phone system is notoriously terrible. I've literally spent entire days trying to reach someone. You're telling me this service somehow magically gets through when millions of people can't? Sounds like a scam to me.
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Savannah Glover
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Felicity Bud
I need to follow up about my skepticism regarding Claimyr. After posting my doubting comment, I actually tried the service out of desperation because I needed clarification on my own primary residence situation and couldn't get through to the IRS. It actually worked exactly as described. I got a call back in about 20 minutes and was connected directly to an IRS representative who helped clarify my specific situation with the 2-out-of-5 year rule. The agent confirmed that my teaching sabbatical overseas wouldn't affect my primary residence status since I maintained the home and all my legal ties to it. I'm still shocked at how well it worked after months of failed attempts calling the IRS directly. Sometimes being proven wrong is actually a good thing!
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Max Reyes
I've gone through this exact scenario with the IRS. From my experience, the "facts and circumstances" test is crucial here. Since you've maintained all your connections to the property (utilities, voter reg, mailing address), never rented it out, and have documentation showing your intent to return, you're in a strong position. One important tip: document EVERYTHING. Keep copies of your work assignment letters showing the temporary nature of your overseas stay. Print out your electronic utility bills, property tax statements, and voting records. Even keep travel records showing your periodic returns to the house. If you ever get questioned, having a comprehensive paper trail makes all the difference.
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Mikayla Davison
•What about foreign earned income exclusion? Doesn't claiming that on your taxes potentially create a conflict with claiming the US house as your primary residence? I'm in a similar situation and worried I might be creating problems for myself.
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Max Reyes
•That's an excellent question about potential conflicts. While claiming the Foreign Earned Income Exclusion does require you to establish that you're a bona fide resident of a foreign country or physically present there for a certain period, this doesn't automatically disqualify your US home as your primary residence for the capital gains exclusion. The key is consistency in how you present your situation. The primary residence exclusion looks at where your main home is located (where you ordinarily live most of the time), while the FEIE looks at where you earn income and spend time. They examine different factors for different purposes. Just make sure your documentation clearly shows that despite working abroad, you've maintained your US home as your main home with the intention to return. Many expats successfully claim both benefits when their situations legitimately qualify.
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Adrian Connor
Make sure you calculate the exact days correctly! Our family messed this up and it cost us big time. The 2-out-of-5 year rule is very specific - you need 730 days of use as your primary residence in the 5-year period ending on the date of sale. Based on your timeline, if you sell in April 2025, your 5-year lookback period starts April 2020. You lived there full-time from April 2020 to March 2023, which is about 3 years or ~1095 days. Plus your periodic visits add up to another ~100 days. You're well over the 730-day requirement. Just make sure you keep a calendar with the exact dates you were physically present, and don't accidentally claim any contradictory tax benefits on other properties!
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Aisha Jackson
•Does the IRS actually count days though? I thought it was more about where you consider your main home to be, not a literal day count. My tax guy said it's more about intent than actual occupancy days.
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Caleb Bell
•You're both right in a way. The IRS does look at the "use test" which requires 2 years of use as your main home during the 5-year period before sale. While it's not strictly a day-by-day count, the IRS does expect you to meet the 730-day threshold if questioned. The key is that "use" doesn't just mean physical presence - it includes periods when you're temporarily away but still consider it your main home. For work assignments, military deployment, or other temporary absences, the IRS typically considers those as periods of "use" as long as you maintain your intent to return and don't establish a new primary residence elsewhere. So while intent is crucial, having documentation of your actual presence (like Adrian mentioned) provides solid backup if the IRS wants specifics. The combination of both factors - clear intent plus substantial physical presence - gives you the strongest position.
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Giovanni Colombo
Your situation looks really solid for qualifying under the 2-out-of-5 year rule! Living there continuously from 2016 to March 2023 gives you way more than the required 2 years within your 5-year window before the April 2025 sale. What really strengthens your case is that you've maintained all the hallmarks of primary residence - voter registration, utilities, banking, and mail forwarding all show clear intent that this remains your main home. The fact that you never rented it out is huge because it demonstrates you always intended to return. Your periodic visits back (the 6 weeks, 8 weeks, and 5 weeks you mentioned) actually help document continued use of the property. Even if you weren't physically there every day, the IRS recognizes that temporary work assignments abroad don't disqualify a property from being your primary residence as long as you maintain that intent to return. One practical tip: keep detailed records of your work assignment documentation showing it's temporary, along with all those utility bills and other ties to the property. If you ever get questioned, having that paper trail makes your position bulletproof. You should be in great shape for the capital gains exclusion when you sell!
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Lim Wong
•This is really helpful! I'm actually in a somewhat similar situation - my spouse and I have been living abroad for work but kept our US home. One thing I'm wondering about though is whether there are any specific IRS forms or documentation we should be filing while overseas to make sure we don't accidentally jeopardize our primary residence status? Like, should we be doing anything proactive on our tax returns to establish this intent, or is it mainly about keeping good records for if/when we get questioned later?
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Admin_Masters
•Great question about proactive documentation! While there aren't specific IRS forms you need to file to "register" your primary residence intent, there are some smart moves you can make on your tax returns to strengthen your position. First, make sure you're consistently listing your US home address on all tax forms (1040, state returns, etc.) even while overseas. If you're claiming the Foreign Earned Income Exclusion, be careful with the language - emphasize that your foreign residence is temporary for work purposes. On your annual returns, consider attaching a brief statement explaining your temporary work assignment if you're claiming both FEIE and maintaining US primary residence. This creates a paper trail of your intent. Also, make sure you're still filing as residents of your home state if applicable. The key is consistency across all your filings - don't accidentally claim homestead exemptions or tax benefits on any foreign property that would contradict your US primary residence claim. Keep paying your US property taxes on time and maintain homeowner's insurance. These ongoing actions on your tax returns and related filings create a clear pattern that supports your position if questioned later.
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Rachel Clark
Based on your situation, you should definitely qualify for the primary residence exclusion! You lived there continuously from 2016 to March 2023, which gives you well over the required 2 years within your 5-year lookback period before your April 2025 sale date. What makes your case particularly strong is that you've maintained all the key indicators of primary residence despite being overseas for work. The IRS looks at the totality of circumstances, and you've got everything lined up perfectly - voter registration, bank statements, utilities, and mail all still tied to the property. Never renting it out is a huge plus since it shows clear intent to return. Your periodic visits (6 weeks in summer 2023, 8 weeks over winter 2023/24, and 5 weeks in May 2024) actually help demonstrate continued use as a residence. The IRS understands that people take temporary work assignments abroad without giving up their primary residence. One thing to keep in mind - make sure you document the temporary nature of your overseas assignment. Keep your employment contract or assignment letter showing it's not permanent. Also maintain that paper trail of all your US connections to the property. If the IRS ever questions your claim, having comprehensive documentation makes your position ironclad. You should be in excellent shape for excluding the capital gains when you sell next April!
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Natalie Wang
•This gives me a lot of confidence! I'm actually in a very similar boat - moved overseas for work in late 2022 but kept our house exactly as you described. We've been worried about the capital gains implications since the property has appreciated significantly. One question I have is about state taxes. Are there any state-level primary residence rules we should be worried about, or is it mainly just the federal 2-out-of-5 year rule? Our state has pretty high capital gains rates and I want to make sure we're not missing anything on that front. Also, do you know if different states have different requirements for what constitutes maintaining residency while living abroad? Thanks for sharing your experience - it's really reassuring to hear from someone who's navigated this successfully!
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