Selling a home owned for less than two years can lead to tax implications, mainly around capital gains tax. Profits from the sale are typically taxed as short-term capital gains, which align with your ordinary income tax rates, ranging from 10% to 37%. The IRS's capital gains exclusion for primary residences, which can exempt up to $250,000 ($500,000 for married couples filing jointly) of the profit from taxes, usually requires ownership and use of the home as a primary residence for at least two of the five years before the sale. This means the exclusion often doesn't apply if you've owned the home for less than two years. However, there are exceptions for sales due to health, employment changes, or unforeseen circumstances that might allow for a partial exclusion. Any taxable gain must be reported on your tax return, but losses from the sale of a personal residence cannot be deducted. Given the complexity, consulting a tax professional is advisable to navigate potential tax liabilities and explore any applicable exceptions. Have questions about serving your home? Book a discovery call with me today.
