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I'm familiar with the need to live at least 2 of the last 5 years in your home to be able to avoid (some/all) of capital gains on a home sale so I don't want to revisit that topic.

I would like to know if someone can point me to a document explaining how that 2 years is determined if you were married and if one person was living in the home, but the other person was working/living out of state? (And assume the parties stayed married, were not legally separated, etc. The separation was only due to a job situation.)

Say for example, 12 months both people were living in the house but the next 12 months, the wife was living there but the husband moved out of state for a job and spent the majority of his time in that state.

I've tried a decent amount of searching online but haven't come across anything useful so far.

Do you have to do something weird and file taxes separately and only get a prorated break? I can see the IRS arguing you didn't live their the full 2 years so you shouldn't get the break. I'm not saying what it should be, just trying to figure out what it actual is according to IRS documents.
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Do you have to do something weird and file taxes separately and only get a prorated break? I can see the IRS arguing you didn't live their the full 2 years so you shouldn't get the break. I'm not saying what it should be, just trying to figure out what it actual is according to IRS documents.

IRS Pub 523 https://www.irs.gov/pub/irs-pdf/p523.pdf spells out that both spouses need to meet the residence requirement to claim the full exemption.

Eligibility Step 3—Residence

Determine whether you meet the residence requirement. If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it doesn't have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period. Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion.

If you were ever away from home, you need to determine whether that time counts towards your residence requirement. A vacation or other short absence counts as time you lived at home (even if you rented out your home while you were gone).


If the husband of the couple you described lived in the home for at least 12 of the months in the 36 months prior to the 24 months you described, he would still meet the residency requirement. However, even if he didn't meet the full residency requirement, they would still be eligible to claim the wife's $250k exemption, and if he meets the distance test for work (described later in Pub 523), he may be able to claim a partial exemption for the 12 months he lived there during the final 24 months they owned the house.

AJ
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but the husband moved out of state for a job and spent the majority of his time in that state.
Did the husband still live in the house?

Did he change his drivers license address?
His voting registration?
His residence according to tax forms?
Or was he temporarily working away from his primary residence and had a second residence near his job?

From pub 523:
"If you were ever away from home, you need to determine whether that time counts towards your residence requirement. A vacation or other short absence counts as time you lived at home (even if you rented out your home while you were gone)."


So - what was his "home"?
Was he off working an oil rig for 3 months at a time, then came home to his wife? I can't see the IRS successfully arguing that doesn't count toward his residence requirement.
Nor if he was working 5 days a week at a different state, but was back for the weekends.

OTOH, if he moved to another state, never went to visit his wife, changed his drivers license, changed voting registration, used the tax form for resident of <state_he_works_in>, etc. I think the IRS could successfully argue that it wasn't his residence.
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but the husband moved out of state for a job and spent the majority of his time in that state.
Did the husband still live in the house?

Did he change his drivers license address?
His voting registration?
His residence according to tax forms?
Or was he temporarily working away from his primary residence and had a second residence near his job?


We have the opposite situation in that I moved to a new state a year before DH joined me when he retired. We bought a new place a little more than 2 years following the purchase of the first house. I had become a resident at the first house for the two years plus two weeks, with DH joining me for the second year. It's now a rental, in year 3 of ownership, but if we sell within the 5 year period, I assumed we could at least claim a pro-rated amount of up to $250K of the capital gains based on my record, not the full $500K we would have been eligible for had he moved at the same time as I did, or we had kept it as a primary residence for another year to secure his two years of residence. I changed my drivers license, registration, primary address on taxes, etc, when moving into the first house. His remained at the state he continued working in, until he retired and joined me in this state.

IP
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Thanks. As usual things get complicated quickly.

I try to apply common sense to things but sometimes that fails miserably with laws/taxes.

I doubt this situation will apply in my case but it was something I was trying to figure out.

Thanks.
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