ALBUQUERQUE, N.M. — Q: My wife and I have listed our home of 19 years, and we have an offer that is conditioned on our carrying back some of the purchase cost. The proposal is a 5-year note that will be amortized as if it were 30 years, and there is a single payment at the end of the 5 years for the balance due on the note. We are debating whether we should wait for a cash offer or simply take this one. We want to retire in Virginia, and the sale will allow us to move on more quickly. But my questions are tax ones. First, I want to confirm that the new tax law did not change the rule that you can sell your main house and not pay tax on the gain. Second, I want to be sure that if we take a note that the tax answer will not change, including if they change the law within the next 5 years to make selling a house less attractive.
A: You can still sell a principal residence and exclude as much as $500,000 of gain. The basic provisions of this law have not changed in the 22 years since it was enacted.
The house must have been your principal residence for 2 of the 5 years before sale. If you both meet this requirement, then your gain exclusion can be as much as $500,000.
The full exclusion also is unavailable if you claimed depreciation for business or investment use of the house, including an office in home. In such a case, you need only report the depreciation as income.