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Bought house [A] in May 2019 for $590k. In 2021, bought house [B] for $915k in July and sold house [A] for $754k in Dec. Moved from A to B july/aug 2021.

UPDATED 1/15/2022...
Both houses were our principle place of residence and we are a married couple, filing jointly, who both lived in house [A] May 2019 through Aug 2021.

Is there tax on the increased value of house [A]? ie. do we owe tax on its increased value: $754- $590k = $164?

ADDENDUM REQUESTED BY Loren Pechtel...
Bought house [A] May 2019.
Moved from A to B July/August 2021

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    I don’t think the is a duplicate. The linked question is about converting a residence to a rental; this is just about buying another house. None of the answers on the linked question seem to answer this question.
    – GendoIkari
    Dec 19 '21 at 2:23
  • irs.gov/pub/irs-pdf/p523.pdf - based on info provided sounds like you meet the qualifications for the exemption but you should read it all and verify.
    – Joe
    Dec 19 '21 at 3:33
  • Two critical pieces of information are missing: You bought A exactly when in 2019? And when did you actually move from A to B? Dec 20 '21 at 5:16
  • These really are the sort of questions that should be asked before engaging in real estate transactions. A competent real estate agent should be able to, if not answer them themselves, at least refer you to someone who can. Dec 22 '21 at 7:12
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Lets break this into two parts:

Bought house [A] in 2019 for $590k. In 2021...sold house [A] for $754k in Dec.

...our principle place of residence.

Is there tax on the increased value of house [A]? ie. do we owe tax on its increased value: $754- $590k = $164?

Using IRS pub 523:

Determine whether you meet the residence requirement. If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it doesn't have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period. Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion.

So if this was the only house involved and the period of 2019 to 2021 covered 730 days then you qualify for the exclusion. If only one qualified for the exclusion, it would protect 250K of gains. Which your $164K gain is well under.

The issue is house you purchased in July 2021:

In 2021, bought house [B] for $915k in July and sold house [A] for $754k in Dec.

Both houses were our principle place of residence.

This is where the complication comes in. Also from Pub 523

Sale of your main home. You may take the exclusion, whether maximum or partial, only on the sale of a home that is your principal residence, meaning your main home. An individual has only one main home at a time. If you own and live in just one home, then that property is your main home. If you own or live in more than one home, then you must apply a "facts and circumstances" test to determine which property is your main home. While the most important factor is where you spend the most time, other factors are relevant as well. They are listed below. The more of these factors that are true of a home, the more likely that it is your main home.

The address listed on your:

  1. U.S. Postal Service address,
  2. Voter Registration Card,
  3. Federal and state tax returns, and
  4. Driver's license or car registration.

The home is near:

  1. Where you work,
  2. Where you bank,
  3. The residence of one or more family members, and
  4. Recreational clubs or religious organizations of which you are a member.

So if you shifted your principal residence to the new home, the first home might not qualify unless you met the 24 month rule before making the switch.

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  • Thank you, mhoran. Seems obvious to me [A] qualifies because we both lived there exclusively, and I worked at [A] exclusively, at least 24 mos. from May 2019 through July 2019, at which, after 26 mos. we moved to new house (where I worked at home exclusively).
    – Doug Null
    Jan 16 at 2:07

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