Q. We’ve rented out our house for slightly more than two years, starting in late 2009. If we continue the rental in 2012, can we still qualify for the home sale exclusion if we sell the home later this year? A.H.S., Atlanta
A. Yes, but watch the timing. The $500,000 home sale exclusion for couples ($250,000 for single filers) applies if you’ve owned and used the home as your principal residence for at least two years out of the five-year period that ends on the sale date. Technically, you can still qualify if you meet these requirements for either 730 days or 24 full months for the five-year period ending on the sale date. For instance, if you started renting out the home on July 1, 2009, and you sell it by June 30, 2012, you will qualify for the full exclusion.
Tip: The “use” period doesn’t have to be continuous. If necessary, you might move back into a home short-term to preserve the exclusion.