Military Home-Sale Clock

When does your tax-free sale window close?

To exclude gain on a former main home (IRC 121) you generally must have lived there 2 of the 5 years before the sale. Qualifying extended duty can pause that clock for up to 10 years (IRC 121(d)(9)). The pause ends when duty ends, e.g. at separation.

Your dates

Still on qualifying extended duty since move-out?

Prefilled with IRS Pub. 523 Example 1 (illustrative; move-in date assumed).

Depreciation recapture. Even when gain is excluded, depreciation taken (or allowable) after May 6, 1997 isn’t excluded and may be taxed at up to 25% (IRC 121(d)(6)). Not modeled: nonqualified use, partial exclusions (121(c)), gaps in qualifying duty, a second home using the election.

Assumes qualifying duty ran continuously from move-out to separation. Only one property may use the election at a time. Not tax advice; confirm with a CPA.