Doron F. Eghbali Real Estate Law Blog on Lawyers.com

As we mostly know, if singles or married couples filing jointly own and use their primary residence for at least two of the past five years, they can avoid federal income taxes on gains of such property, respectively, up to $250,000 (for singles), and $500,000 (married filing jointly). However, the problem would be for those who have to - for legitimate reasons - sell their primary home before the two-year minimum threshold. Well, hope is not all lost. There are indeed, several legitimate reasons, as the IRS views them.

LENIENCY FROM THE TAX CODE

The law considers some reasons that force a homeowner to sell a primary residence as legitimate enough to provide relief. Examples of such reasons are:

• You Sold Your House because of your job: For example, in this economic environment, your boss asked you to move to another state, fearing you might lose your job and not being able to pay two mortgages, you sell your house (of course, if you can sell in this real estate climate).
• You Sold Your House Because of Health Reasons: For example, you developed a chronic knee problem that prevented you from taking the stairs. You had to move to another property with elevator. Just make sure, you obtain a letter from your letter and keep it for your tax records.
• You Sold Your House Because of Unforeseen Events: For example, because of divorce, separation, pregnancy with multiple births or a death in the household of your primary residence, you are forced to sell the house.

If you had to sell your house for the reasons already enumerated, then, you get to take advantage of prorated tax break. The way the prorated tax break works is as follows:

• Lived and Owned Your Home for Less than Two Years: Let us say you had to move because your boss promoted you to a better position with a better pay (a rarity these days). Let us also assume, you lived in your home for 12 months.
• Deduct the Number of Months Lived and Owned by 24: You divide 12 (the number of months owned and lived in your house) by 24 (the minimum number of months to take advantage of tax exclusion on primary residence). The result is 50%.
• Result of the Division Equals Your Tax Break: Now, you could take advantage of 50% of the allowed $500,000 for married couples filing jointly.

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DORON EGHBALI is a Partner at the Beverly Hills Offices of Law Advocate Group, LLP. He Primarily Practices Business, Real Estate and Entertainment Law. He Can Be Reached at: 310-651-3065. For More Information, Please, Visit: HERE.