As a retired Navy member with a 100 percent disability, if I sell my primary residence, which I’ve only owned for a year, will I owe any capital gains taxes?

by Jennifer L. Romberger, CPA, EA | May 01, 2019

If I only owned my primary residence for a year and I want to sell my house, will I owe any taxes due to capital gain? I will be profiting $6,000 if we sell for the list price, but there is a chance I could not be profiting anything. I am retired from the Navy, and I have a 100 percent disability. Also, the reason I'm moving is I now work from home and need an office. We want to do new construction that will take a year, so I can't put the money in a 1031 exchange.

Yes, there is a chance that any gain recognized will be subject to income tax. There are exceptions surrounding military service, change of employment, and disability, but due to the limited information provided, I don’t know if you would qualify. Using a year of use, if you recognize a gain of $6,000, your exclusion amount is $125,000 if you file single, $250,000 if married filing jointly. Based on my estimated calculation, the gain would be excluded. Lastly, I don’t know if you’ve excluded a gain in the past couple of years, but if you had, that would come into consideration too.

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Answered by: Jennifer L. Romberger, CPA, EA, is with Long Financial Group Inc. in Blue Bell, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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