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Can I partially exclude home sale gain since I lost my job?

November 29, 2004


Subject:  Tax break on selling my home?
Date:  Mon, 15 Nov 2004
From:  Paul

Hello Mike,

I have a home in Hayward, which I lived in for about a year. I lost my job in 2002. Since then, I moved to a less expensive home in Stockton, CA and have been living on savings while renting out the home in Hayward. I can't hold onto the Hayward home anymore and have to sell it. How much tax will I have to pay on the gain? Does an exclusion apply in this situation?

Thanks,
Paul

Answer

Date:  Wed, 24 Nov

Hello Paul,

You may be eligible for a partial exclusion of gain because you are selling the home relating to the unforeseen circumstance of losing your job. (Reg. 1.121-3(3)(2)(iii)(B).) If you lived in the home for 12 months and you are a single person, you would be able to exclude $125,000 of gain from the sale of the residence. (12/24 X $250,000)

The accumulated depreciation during the rental period isn't eligible for exclusion and will be subject to a maximum federal tax rate of 25%. The maximum California tax rate is 9.3%. You should meet with a tax advisor to determine the actual rates that apply for your situation.

Good luck!
Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Can I partially exclude home sale gain since I lost my job?

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