Question:
“I just sold my house. How long do I have to reinvest and buy another home?”
Answer:
There’s no reinvestment requirement when you sell your home. The law that applies is IRS Section 121, known as the Principal Residence Exclusion.
Under that law, you don’t pay tax on the first 250K of gain (singles) or 500K of gain (couples).
The basic requirements are that you must have owned and lived in the home as your principal residence for at least 2 of the past 5 years. The 2 years need not be consecutive.
You may be thinking of either a 1031 exchange of investment property, which does have a reinvestment period. Or you may be thinking of the law applying to principal residences that did have a time frame…but that law changed in 1997(?) and no longer applies.
As I’m not a tax professional, please confirm all of the above with your favorite tax pro.
