Primary home capital gains

[SoClose]

After buying a second home for our snowbird lifestyle, we are pondering changing our Primary residence to the new home/state. But don’t want to sell or rent the current primary which we’ve owned for 30 years. Someday we will want to sell it, and will have a substantial gain, which we wouldn’t want to pay capital gains on.

It appears we could have five years with averaging, but not sure that is long enough.

Any thoughts or plan on a way to keep the capital gains exclusion?

 

[RunningBum]

Not sure what you mean by "averaging". The main rule I know is that your house has to be your primary residence for at least 2 of the 5 previous years before the sale to get the exclusion. That gives you a couple years to see if it works out at the other home and sell it then. If you want to keep it longer, you're going to have to have it be your primary residence for two years again before selling it. Or forego the $500K exclusion.

I'm not sure if "primary residence" means you have to have spent 40% of 5 years in it, or if you actually have to things like car and voter registration and things like that using that address.

 

[Trooper]

RunningBum is right. You will need to live two years out of the last five years in your primary home in order to exclude $500K of capital gains. The two years does not need to be consecutive; any 24 months out of the prior 60 will suffice.

So you could live in your "snowbird" home for at most three years prior to selling your primary home to get the exclusion.