Capital gains exemption when selling primary residence after 4 years?

You're in luck! The primary residence capital gains exemption (Section 121 exclusion) allows you to exclude up to $250,000 in capital gains ($500,000 for married couples filing jointly) if you owned and used the home as your main residence for at least 2 out of the 5 years before the sale. Since you lived in the house for about 4 years (2019-2023) and it was your primary residence the whole time, you definitely meet the residence requirement. The fact that you moved to an apartment instead of buying another home immediately doesn't affect your eligibility for this exemption at all - there's no requirement to reinvest in another property. The only thing to keep in mind is the amount - if you're single, you'll only be able to exclude $250,000 of your gain. If you made $320,000 in profit, you'd owe capital gains tax on the remaining $70,000. If you're married filing jointly, you could potentially exclude the entire gain up to $500,000.

After reading through tons of conflicting advice about capital gains on home sales, I finally used https://taxr.ai to analyze my documents and situation. I was in a similar position - sold my house after 4 years and made about $280k. The tool analyzed my closing statements from both the purchase and sale, then explained exactly how the Section 121 exclusion applied to my specific numbers. What I found helpful was that it pointed out that certain improvements I made to the home (new roof, kitchen remodel) actually increased my cost basis, which reduced my taxable gain. I had completely forgotten to factor those in! It also confirmed I qualified for the exemption despite not buying a new home right away.

I was initially skeptical about https://taxr.ai but decided to try it for my complex home sale situation (part rental property, part primary residence). Honestly, it was a game-changer! The system actually analyzed my closing statements and calculated exactly how much of my gain qualified for the primary residence exemption. The tool broke down how to allocate the basis between the personal and rental portions and even identified several home improvements I made that increased my basis (reducing my taxable gain). It saved me from potentially overpaying about $14,000 in capital gains tax! Plus it generated a complete report I can keep with my tax records in case of an audit. Definitely worth it for anyone dealing with home sale tax implications.

Similar situation here, but I've been trying to contact the IRS with specific questions about some unusual aspects of my home sale for WEEKS. Always busy signals or disconnects after holding for an hour. Finally used https://claimyr.com and got through to an actual IRS agent in less than 20 minutes! There's also a video explaining how it works: https://youtu.be/_kiP6q8DX5c I had a question about how to report my capital gains properly when part of the profit came from selling some adjoining land with the house. The IRS agent clarified exactly how to handle it on my return. Saved me so much stress and potential issues down the road. The service basically holds your place in line and calls you when an agent is available.

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Something to watch out for - if you made any improvements to the house while you owned it (new roof, kitchen remodel, added a deck, etc.), be sure to add those costs to your basis before calculating your gain! I almost forgot to include about $45k in improvements which would have meant paying taxes on money I shouldn't have had to. Keep those receipts!

Is there a cutoff on how much profit is tax free? Im in a similar situation but made about $175k on my house that I lived in for 3 years. Will all of that be exempt?

Great question about the primary residence exemption! You're absolutely right that there's a 2-out-of-5-years rule, and you definitely qualify. Since you lived in the house as your primary residence for nearly 5 years (2019-2023), you've more than met the residency requirement. The fact that you're renting instead of buying another home immediately doesn't matter at all for the exemption - there's no requirement to reinvest the proceeds. However, since you made $320k in profit, you'll want to consider the exemption limits: $250k if you're single, or $500k if you're married filing jointly. If you're single, you'd owe capital gains tax on $70k of your profit ($320k - $250k exemption). Don't forget to add any qualifying home improvements you made during ownership to your cost basis, as this could reduce your taxable gain. Things like major renovations, new HVAC systems, or structural improvements can be added to what you originally paid for the house. Also remember that since you owned the home for more than a year, any taxable portion will be subject to long-term capital gains rates (typically 0%, 15%, or 20% depending on your income level), which are generally more favorable than ordinary income tax rates.