22 Dec I’m in the military. What happens to tax if I sell my home?

Q. I’m in the military and I’m a New Jersey resident. I bought my house in December 2014 and lived in it until I started renting at the end of January in 2020 due to getting orders to California and now I’m stationed in Germany. I am debating on selling my house or continuing to rent it out. I pay New Jersey state taxes. Would I have to pay the exit tax or gains tax if I were to sell the house? I’m confused.
— Serving

A. What taxes could be due when a home is sold can be confusing.

But if you’re on active duty, there are additional considerations.

Generally, you can exclude $250,000 of gain as a single, or $500,000 if married and filing a joint return, from the sale of your home if it was your principal residence for 24 of the prior 60 months, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

He said the months do not have to be consecutive.

You said you lived in the house from December 2014 up to January 2020, so it seems you hit that 24-month target, Kiely said.

But active duty military get an exception to the 60-month rule if you are on qualified extended duty, Kiely said.

“You are on qualified extended duty if you are called or ordered to active duty for an indefinite period or for a definite period of more than 90 days,” Kiely said. “You must also be serving at a duty station at least 50 miles from your main home or you are living in government quarters under government orders.”

As long as you are on active duty, the 60-month clock has stopped, he said.

“When you come home from active duty you can either sell your home or move back into it,” he said. “You still are entitled to the $250,000/$500,000 exclusion. Thank you for your service.”

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This story was originally published on Dec. 22, 2023.

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