If an aging parent or loved one becomes physically or mentally unable to care for themselves and moves into a licensed care facility (such as a nursing home or assisted living), a special rule may save tax when selling their home. If they owned and used the home as their principal residence for an aggregate period of at least one year during the five years preceding the sale, time spent in the facility before the sale can count as continued use of the home for purposes of the home sale gain exclusion. Under the exclusion, up to $250,000 of gain ($500,000 for certain married couples filing jointly) can generally be excluded from gross income, subject to additional rules. Contact us for help.
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