- As long as taxpayers lived in the home as their principal residence for two years during the five years prior to the sale of the home, then the IRS will treat the sale as a tax-free exclusion to their capital gains rules.
- The IRS requires homeowners to report income from the sale of property exceeding $250,000.
Taxpayers who have more than one home may only exclude the capital gains profits from the home the taxpayer lives in for the majority of the tax year in which the sale occurred. If the homeowner owns a house but decides to rent the house to tenants and lives in a rented home, the federal regulations treat the rented home as the taxpayer's primary residence. - The IRS considers the following factors to determine which property should be considered a primary property for tax purposes: location of family, job location, address listed on government-issued identification, bank location and the location listed for utility bills and other correspondence.
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