I purchased a home in December 2015. While I occupied the property starting when the transaction closed, for whatever reason, I didn’t update my driver’s license to that address until April 2016. I am trying to avoid paying capital gains when I sell the home. Will I able to sell the home in December 2017 or will I have to wait until April? I’m not sure how the IRS determines occupation.
The determination of whether you meet the residency requirements to qualify for the capital gain tax exclusion is based on facts and circumstances. The IRS guidelines are explained in IRS Publication 523, Selling Your Home.
You need to have lived in the home for a total of 24 months, or 730 days, in the five-year period before the sale date. The home needs to be considered your “main home” during that period. The most important factor is where you spend the most time. Here are the factors that provide support for an address being your main home:
The address is listed on your:
- U.S. Postal Service address
- Voter registration card
- Federal and state tax returns
- Driver's license or car registration
The home is near:
- Where you work
- Where you bank
- The residence of one or more family members
- Recreational clubs or religious organizations of which you are a member
The more of these factors you meet, the more likely the address would be considered your main home. Any other records you maintain showing that you were regularly living at that address should also be kept. I wish you all the best in the new year.
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Answered by: Dominic T. Cutuli, CPA, is a principal with H2R CPA in Pittsburgh.