Will I owe capital gains tax if I sell my house after buying a new primary residence?

You're in luck! Based on what you've described, you should still qualify for the Section 121 exclusion, which allows you to exclude up to $250,000 of capital gains ($500,000 for married filing jointly) from the sale of your primary residence. The key requirements are that you've owned and used the home as your primary residence for at least 2 of the 5 years preceding the sale, which you clearly meet having lived there for 6 years. The good news is that you don't need to be living in the home at the exact time you sell it. The fact that you've established a new primary residence shortly before selling doesn't disqualify you from this exclusion. However, there is one thing to watch out for: don't convert the property to a rental for too long before selling. If you rent it out for years, you may have to deal with depreciation recapture and partial loss of the exclusion.

Just wanted to jump in here because I was in almost the exact same situation last year and got super confused about the tax implications. I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out my specific situation without having to pay for a consultation with a tax pro. I uploaded some docs about my properties and answered a few questions about my timeline, and it gave me a really clear breakdown of what I could exclude and what I might owe taxes on. They even showed me what forms I'd need to file. Saved me a ton of stress during an already stressful moving process!

Hey everyone, I just wanted to follow up after trying taxr.ai from the recommendation above. I was hesitant at first but decided to give it a shot with my complicated property situation. I gotta say, I'm seriously impressed! The tool walked me through every aspect of my situation - how long I lived in each property, the timing of the sales, even factored in some renovations I did. It gave me this super clear breakdown showing I qualify for a partial exclusion on one property and full exclusion on another. The coolest part was it showed exactly how much of my gains would be excluded and what portion might be taxable (turns out very little in my case). It's way more thorough than I expected and definitely cleared up my confusion!

Has anyone here tried calling the IRS directly about capital gains questions? I spent THREE DAYS trying to get through to someone who could answer my questions about property sales. Kept getting disconnected or waiting for hours. Finally found Claimyr (https://claimyr.com) after searching for solutions online. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c It's basically a service that navigates the IRS phone system for you and calls you back when an actual agent is on the line. I was skeptical but desperate after wasting so much time. Within about an hour I was talking to a real IRS agent who answered all my questions about my specific property situation. Such a lifesaver during tax season when it's impossible to get through!

Well, I need to eat my words about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my property sale situation, so I decided to try it anyway. I'm honestly shocked at how well it worked. I submitted my request around 2pm, went back to work, and less than 90 minutes later got a call connecting me to an actual IRS agent. The agent was able to answer my specific questions about the primary residence exclusion when you've lived in multiple properties. Turns out I was misunderstanding a major aspect of how the 2-in-5-year rule works, which could have cost me thousands. For anyone else struggling to get clear answers on property sales and capital gains, being able to actually speak with an IRS agent made all the difference. Never thought I'd be recommending a service like this, but it definitely delivered.

One thing nobody's mentioned yet - the capital gains exclusion is up to $250k for single filers and $500k for married filing jointly. So depending on how much your house has appreciated since you bought it, you might not owe anything anyway. Like if you bought for $300k and are selling for $450k, that's $150k gain which is below the $250k threshold (assuming you're single). Even if married, you'd need a gain over $500k before taxes kick in. Do you know roughly how much your gain will be? That might make your decision easier.

Just want to add - I went through this exact scenario last year. Bought new house, moved in, then sold old house 3 months later. We had lived in the old house for 4 years. Our tax guy confirmed we didn't owe any capital gains because of the 2-out-of-5-years rule. As long as you've used it as your primary residence for 2 years during the 5-year period ending on the date of sale, you're good. One tip - keep ALL your closing documents from both purchases and the sale. Also keep receipts for any major improvements you did on the old house (new roof, kitchen remodel, etc) as those get added to your cost basis.

Idk if this matters but make sure you keep track of exactly when you move out of the old house. My friend got audited and the IRS was super picky about the exact dates he lived in each property. Had to provide utility bills, mail, etc to prove when he actually moved. Just something to be aware of in case you ever get questioned.

Another thing to consider - if you do decide to rent out your old house for a few months before selling, make sure you understand the tax implications of that rental period. You'll need to report any rental income, and you can deduct expenses like repairs, maintenance, and depreciation. But as mentioned earlier, any depreciation you claim will need to be "recaptured" when you sell, meaning you'll pay taxes on that portion even if the rest of your gain is excluded. For a short rental period of just a few months, the accounting might not be worth the hassle unless the rental income is substantial. Something to factor into your decision between selling immediately vs. renting temporarily.

Just wanted to add some practical advice based on your situation - since you're well under the capital gains exclusion threshold and planning to sell relatively soon after moving, I'd recommend getting a pre-listing inspection done on your current house while you're still living there. This way you can address any issues before putting it on the market, and you'll have time to get quotes and make repairs without the pressure of showings. Also, consider timing the listing strategically. Spring is typically the best selling season in most markets, so if you're closing on your new house soon, you might want to list the old one right after you move to take advantage of peak buying season. With your gain being only $140k and married filing jointly, you have plenty of cushion under the $500k exclusion, so there's really no tax benefit to waiting longer. One last tip - start decluttering and staging prep now while you're packing anyway. Makes the whole process much smoother!

I've been through a similar situation and wanted to share what I learned about the capital gains exclusion timing. The IRS Section 121 exclusion is really forgiving about the exact timing of when you move out versus when you sell. What matters is that you meet the "2 out of 5 years" test - you need to have owned and lived in the home as your primary residence for at least 2 years during the 5-year period ending on the date of sale. Since you've lived there for 6 years, you have a huge buffer. The key thing I discovered is that you can move out, establish a new primary residence, and still sell the old house months later while keeping the exclusion. The IRS doesn't require you to be living in the house on the actual sale date. With your $140k gain and married filing jointly status, you're well under the $500k threshold, so you should owe zero capital gains tax regardless of your exact timing. Just make sure to keep good records of your move-out date and new residence establishment in case you ever get questioned. Good luck with both transactions!

Just wanted to chime in with a slightly different perspective on timing your sale. While everyone's correctly pointing out that you'll easily qualify for the capital gains exclusion, don't forget about the potential benefits of holding onto the property a bit longer if the market conditions are right. Since you have such a large buffer under the $500k exclusion (your $140k gain), you might want to consider whether home values in your area are still appreciating. If the market is strong and you can comfortably handle carrying two mortgages for a few months, waiting could potentially increase your proceeds without any additional tax burden. That said, there are definitely costs to consider - two mortgage payments, insurance, utilities, maintenance, etc. Plus the stress factor of managing two properties. But if your local market is hot and inventory is low, listing in late spring might get you a higher sale price that more than offsets the carrying costs. Just another angle to consider as you make your decision. Either way, sounds like you're in a great position tax-wise!