Using a VA Loan on a House You Don't Plan to Keep
You only lived in your house for a little over a year when you found out you had to move to a different state. Does that mean you're going to take a big hit on your taxes?
Thanks to the capital gains exemption, you don't have have to pay taxes on up to $250,000 of profit from the sale of your house, or $500,000 for married couples. As long as you've lived in your home for at least two of the last five years. That can be a problem for a lot of military families who might have to move unexpectantly. The good news? There are a few exceptions.
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Qualified extended duty
The two year time period makes sense for a civilian, but what happens if Uncle Sam needed you somewhere else for some of those years? There is a provision to let you suspend the time you spent away from home if it's connected to your military duties. So, if you lived in the house for a year, then were deployed for four, and then came home for another year, you can suspend the four years you were on duty. You suspend any 10 year period if you were:
- at a duty station at least 50 miles from your home
- living in government housing due to government orders
If you're moving because of a permanent change of station, then you might be eligible for the partial exclusion on the capital gains tax. Be sure to talk to a tax advisor to make sure your particular situation meets the requirements.
There are lots of other ways states help veterans pay less in property taxes. Check with your state's VA office to make sure you're taking advantage of all of them!