Your Questions Answered
At Ashlar, I firmly b that an educated home buyer or seller is best equipped to make their own decisions. That’s why I take time out of my day each and every day to answer someone’s real estate question. And, when I think the answer can be useful to you as well, I share it here. So without further ado:
The capital exemption requires that you have lived in the house for two years. That’s a full stop, hard line. Technically the rule is lived in the house 2 years of the last 5.
So basically yes, you will have to pay capital gains because you have not lived there long enough.
If you lived there for two years, the exemption would be a $250,000 if single or $500,000 if married. Meaning you would not have to pay capital gains on the profit / equity up to a maximum of $250,000 / $500,000.
So choices are to either sell and pay the capital gains taxes or hold and reside in the property until you hit the 2 year mark.
The impact of this taxable event isn’t as clear as you would think as it depends on what else is going on. It isn’t withheld or taken out like a sales tax. It’s part of the tax reconciliation you do for tax day. So if you have some other activity / lossess it could offset the capital gains event. You’ll need to speak with a tax professional to know what it really lookslike.
Maximum is 37% I believe.