The good news is that you can still get a tax free exemption on the sale of your main home. The amount of the tax free exemption is $250,000 if you are single or $500,000 if you are married filing a joint return. Your home can be a house, condominium, stock-cooperative, modular home or mobile home fixed to land.
There are two (2) simple tests which you must meet to get the tax free exemption:
- Ownership Test – you must have owned your home for at least two (2) years prior to the sale
- Use Test – you must have used the home as your main home for at least two (2) of the last five (5) years.
You are only eligible to use this tax free exemption once every two years. But you are eligible to use it as many times as you want.
Tax Planning Strategy: Some taxpayers have chosen to purchase a home approximately every two (2) years, live in the home, maybe fix it up to increase its value and then sell it for a tax free gain.