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I have lived in my townhouse (primary residence) since July 2015 and have considered selling my house due to the crime in the area picking up. I have considered purchasing a new house in a better area because 2 out of the 14 units in my area have been broken in and someone was robbed at knife point at the community mail box, all in the past 3 months.

I purchased the townhouse for $175,000. And based on estimates in the area from my own research and real estate agent, I could list my unit for about $212,000 and estimate to gain anywhere from $25-30K.

I understand that I do not meet the 2 year rule and was wondering how much I will be taxed on any capital gains? Or if there is something else to consider about avoiding capital gains tax by using all the proceeds for another home purchase? My state of residence is AZ if that makes any difference.

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    One thing to consider is that you will make 25-30K in less than a year, even though the crime is picking up and units in your complex have been broken into. I would be concerned that you would be unable to sell, or have to lose money on the deal.
    – mhoran_psprep
    Apr 17, 2016 at 20:55
  • Thank you @mhoran_psprep for your feedback. I will definitely consider that.
    – jdgray
    Apr 17, 2016 at 23:15

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The "use the proceeds to buy next house" changed with the tax code in 1986 I believe. The 2 year rule has one exception, a prorated exclusion if you move due to job change or unforeseen circumstance. I don't think either applies. If you sell after 1 yr, the gain is long term, a bit better than the regular bracket.

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