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Waiting it out to close on home
Waiting it out to close on home
Tax Talk by George Saenz • Bankrate.com Dear Tax Talk, My husband and I purchased our home on Aug. 26, 2003. We are now selling, and purchasing another home. We have arranged for the closings on both homes to be Aug. 26, 2005 (one in the morning, one in the afternoon) to avoid paying capital gains tax. Recently I heard that we do not have to wait until the exact date of the two-year anniversary to close, as long as we are closing in the month that the two-year mark is hit. Is this true? Can we move up our closing dates to earlier in August? Thank you. -- Denise Dear Denise, Stick with your scheduled closings. The general rule is that an individual can exclude up to $250,000 in gain from the sale of their principal residence, married couples get up to $500,000 in exclusion. To qualify, you have to have owned and used the home as your principal residence for a period of two years within the last five years. The two years do not have to be consecutive, but rather can be cumulative within the five-year period. The regulations specifically spell out that two years means 24 full months or 730 days. You can count days as used when you are temporarily absent from the home such as on vacation or in the hospital. Since you will have owned the home for just the requisite period, you should be careful that you can demonstrate that you actually occupied the home as your principal residence on the days you closed the purchase and the sale. In other words, just because you owned the home for two years doesn't mean that you automatically meet the use test, unless you are a fast mover. http://www.bankrate.com/nltrack/itax...20050726a1.asp === "In a world where more than 10 million americans live with cancer -- we believe unity is strength, knowledge is power, and attitude is everything!" -- Livestrong, by Lance Armstrong |
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