I always assumed if I met all of the qualifying criteria of selling our primary residence that use to be our second home I would still pay taxes. I remember reading about it in 2008
Here is what TurboTax says (I find the same thing with other companies but not anywhere does the IRA mention it)
“Note: Congress has clamped down on this break for taxpayers who convert a second home into a principal residence after 2008.”
https://turbotax.intuit.com/tax-tip...ership-selling-a-home/L6tbMe3Dy#convertsecond
On the TaxAdviser it gives a clear explanation
“With the passage of the Housing and Economic Recovery Act, beginning January 1, 2009, the full $250,000/ $500,000 exclusion under Sec. 121 will no longer be available on the sale of a taxpayer's principal residence if the residence was subject to nonqualifying use prior to its ultimate disposition (Sec. 121(b)(4)(A)).
Definition of nonqualifying use: For purposes of determining the amount of the Sec. 121 exclusion, a period of nonqualifying use is defined as "any period during which the property is not used as the principal residence of the taxpayer" (Sec. 121(b)(4)(C)). For example, periods of property use as a rental property, a vacation home, investment property, or property used in a trade or business would be periods of nonqualifying use.”
https://www.thetaxadviser.com/issue...convertingsecondhometoprincipalresidence.html
TurboTax refers to IRS Publication 523 Selling Your HomeIRS Tax Topic 703: Basis of Asset
I did the worksheet and it does not say we have to pay taxes ( we never rented and never used it as a business)
https://www.irs.gov/publications/p523#en_US_2020_publink100073096
How Much Is Taxable?
"Review of the Eligibility Test. Generally, your home sale qualifies for the maximum exclusion, if all of the following conditions are true.
You didn’t acquire the property through a like-kind exchange in the past 5 years.
You aren’t subject to the expatriate tax.
You owned the home for 2 of the last 5 years and lived in the home for 2 (1 if you become disabled) of the last 5 years leading up to the date of the sale.*
For the 2 years before the date of the current sale, you didn't sell another home on which you claimed the exclusion.
The sale doesn’t involve the transfer of vacant land or a remainder interest.**""
Here is what TurboTax says (I find the same thing with other companies but not anywhere does the IRA mention it)
“Note: Congress has clamped down on this break for taxpayers who convert a second home into a principal residence after 2008.”
https://turbotax.intuit.com/tax-tip...ership-selling-a-home/L6tbMe3Dy#convertsecond
On the TaxAdviser it gives a clear explanation
“With the passage of the Housing and Economic Recovery Act, beginning January 1, 2009, the full $250,000/ $500,000 exclusion under Sec. 121 will no longer be available on the sale of a taxpayer's principal residence if the residence was subject to nonqualifying use prior to its ultimate disposition (Sec. 121(b)(4)(A)).
Definition of nonqualifying use: For purposes of determining the amount of the Sec. 121 exclusion, a period of nonqualifying use is defined as "any period during which the property is not used as the principal residence of the taxpayer" (Sec. 121(b)(4)(C)). For example, periods of property use as a rental property, a vacation home, investment property, or property used in a trade or business would be periods of nonqualifying use.”
https://www.thetaxadviser.com/issue...convertingsecondhometoprincipalresidence.html
TurboTax refers to IRS Publication 523 Selling Your HomeIRS Tax Topic 703: Basis of Asset
I did the worksheet and it does not say we have to pay taxes ( we never rented and never used it as a business)
https://www.irs.gov/publications/p523#en_US_2020_publink100073096
How Much Is Taxable?
"Review of the Eligibility Test. Generally, your home sale qualifies for the maximum exclusion, if all of the following conditions are true.
You didn’t acquire the property through a like-kind exchange in the past 5 years.
You aren’t subject to the expatriate tax.
You owned the home for 2 of the last 5 years and lived in the home for 2 (1 if you become disabled) of the last 5 years leading up to the date of the sale.*
For the 2 years before the date of the current sale, you didn't sell another home on which you claimed the exclusion.
The sale doesn’t involve the transfer of vacant land or a remainder interest.**""
