Capital gains tax home sale exclusion: Contingent on buying new home?

December 28, 2021 4:22 PM

I'm going to sell my house and will qualify for the capital gains tax exclusion. Or will I? Do I have to buy a new primary residence within a certain period of time to qualify for the exclusion? Details below the fold.

I've read "26 U.S. Code § 121 – Exclusion of gain from sale of principal residence" to the best of my ability and talked to a real estate lawyer, and I can't find anything about the capital gains tax exclusion being contingent on putting profits into a new principle residence within some period of time. But I feel like I'm missing or forgetting something.

So in short, if I sell my residence, make a profit, and qualify for the capital gains tax exclusion, do I have to buy a new residence within some period of time? Or am I hallucinating that part?

posted by bassomatic to Work & Money (4 answers total)

Best answer: You may be thinking about a 1031 Exchange for investment properties. For a primary residence there's no requirement to purchase a new home that I am aware of.
posted by AaRdVarK at 4:38 PM on December 28, 2021 [4 favorites]

Best answer: If you are my generation, you might be thinking of the old law was that you could roll over your cost basis and delay capital gains if you bought a new house within x months before or after the sale, coupled with the ability to exclude a certain amount of capital gain if you were over 55 (and presumably downsizing). This law changed about 20 years ago to the current system where you get an exclusion every time you sell your primary residence (with a few specific limitations)
posted by metahawk at 4:47 PM on December 28, 2021 [8 favorites]

Best answer: I’ve sold several houses with several different brokers at this point, and the exemption being contingent on buying a new house has never been brought up. This last time in particular I did not buy a new house and my tax person didn’t say anything about it come April.
posted by Tell Me No Lies at 10:44 PM on December 28, 2021 [1 favorite]

Metahawk is correct. That law was changed some 20 years ago. The only other point to be aware of, under current law, is the exclusion is up to $250k gain for a single filer or $500k for couple filing jointly.
posted by jtexman1 at 11:04 AM on December 29, 2021 [1 favorite]