Most people know that main residence = exemption from Capital Gains Tax.
Usually you (and your spouse) can only claim one main residence at a time.
If you are changing houses then for a limited time you can treat two dwellings as your main residence.
The concept is that you can buy your new home first and within six months sell your old home.
There is some fine print.
- Your old house must be your main residence for at least three months of the last twelve months.
- You cannot have earned any income (e.g. rent) from the old house in the last twelve months.
- Your new house becomes your main residence (i.e. you can’t just elect for it to be your main residence, you have to actually move in).
If you are outside the six month period you may wish to elect for the old home to be your main residence (see the six year rule post) so that there is no capital gains tax payable on that home. You would only do this if the taxable gains on the old home is considered to be higher than the potential gains on the new home.
Author: Stacey Walker