I have lived in my home for 18 of the 24 months I've owned the home. If I sell the home now, I will make a $30,000 profit. Will I have to pay capital gains on this sale?

ANSWER

The BIDaWIZ Team's Answer:

There is a capital gains tax exclusion for homeowners that have lived in their primary residence for two of the last five years as per Internal Revenue Code Section 121. Even though you do not meet the 2 year use test, you may be eligible for a reduce capital gains exclusion as per IRC Section 121(c). Specifically, the code allows taxpayers who do not meet the two of five year ownership and use requirements due to a change in employment, health, or unforeseen circumstances to take a reduced, prorated exclusion. Also, it is important to note that if you are in the 15% ordinary income tax bracket or lower, the previous point is moot as you won't be subject to capital gains taxes anyway. Please note that there is a 4.5% Arizona capital gains tax to consider as well.