Key insights
- The article discusses the 'non-qualified use' rule regarding capital gains exclusion on a primary residence, highlighting that renting a property before living in it can limit the exclusion. This could slightly dampen housing investment sentiment as it reduces potential tax benefits, but the impact on US equities is minimal.
I moved into a house that I rented for 9 years with the goal of living in it for two to qualify for the capital gains exclusion as a primary residence. But I just learned about "non-qualified use." Does this mean I'm not going to be able to take the $250,000 exclusion even if I live here for 2 years?
Non-Qualified Use: If you rent the house before you move into it (treating it first as a rental, then as a primary residence), you may not be able to exclude 100% of the gain. Only the portion of the gain allocated to the time you lived in the home as a primary residence is excluded.