Whenever a person sells their primary home, they often times make a big profit. However, that profit will be taxed by the IRS. If you want to learn how to not file taxes on the profit made from selling your home, you need to follow a few instructs and have good business sense.
A person can gain untaxed profit of up to $250,000 dollars when they sell their home (or for married couples, the profit gain can go up to $500,000). However, the main requirement in order to keep all the profit to yourself is that you needed to have lived in that home for the bare minimum of two years. You need to have lived in the home for 2 consecutive years; you just need in show that you have lived at the residences for a minimum of 24 months for it to be counted as a primary residence. The 2 out of 5 year rule basically states that as the owner of that property you have lived there for a minimum of two years out of five.
Generally, the 2 out of 5 year rule is what will help exclude your profits from taxation.
However, there are exceptions to this standard 2 out of 5 year rule. Those exceptions are allowed because life is an ever changing process and unexpected things can happen to anyone. The government understands this; therefore it will allow a person to keep their portion of gains if the need to move arises because of unexpected circumstances.
The two exceptions are as following: the person had to change their location because they need to follow their job. This reason could apply to anyone who needed to move because they started a new job or their employer moved to another location. Another exception would be health concerns. If a person needs to sell their home because of medical reasons, then they can justify the keeping of their profit. They just need to have those medical documents ready to show as proof that they really were sick.
Nonetheless, any gain on the sale of your home must be reported to the IRS on Schedule D as capital gain, even if you are able to keep it. Just keep in mind that honesty is always the best policy. If the IRS finds out that you lied on your returns, they will come and pay you a visit.