PA Sale of Residence

[HBurkholder]

TP sold PA residence which he occupied for approx.15 months to move out of state for new job. My understanding is that on federal level he qualifies for reduced exclusion which in this case is total exclusion. My question - does PA follow Federal rules on the reduced exclusion. The PA tax guide is unclear to me. It states that exception is made to the once in 5 years for job reasons but does not state that less than two years is eligible for reduced exclusion if the move is job related.

[BP.]

http://www.revenue.state.pa.us/revenue/lib/revenue/rev-625.pdf

Check out this little brochure with Q & A re sale of your home. Hope it'll help you.

[HBurkholder]

Does not answer the question

Very nice brochure but does not answer the question as to whether the gain is excluded if "lived in less than 2 of last 5 years" if move was due to job change. It does state that "no other sale in 5 years " does not apply, but does not address "less than 2 years"

[BP.]

Very nice brochure but does not answer the question as to whether the gain is excluded if "lived in less than 2 of last 5 years" if move was due to job change. It does state that "no other sale in 5 years " does not apply, but does not address "less than 2 years"

It's there. Text from the brochure (PA REV 625) that I gave you the link to:

“ . . . if the principal residence is sold due to
an unforeseen change in employment, health or
severe financial hardship, a taxpayer could qualify
for the exclusion. An unforeseen change is one
caused by an accident, illness, loss of property,
casualty, or an other unexpected event beyond
the control of the taxpayer.
Example: If in the previous example Rob and
Ann sold their principal residence in Erie because
Ann’s employer relocated her to Williamsport, they
would qualify for the exclusion from the two-year
prior sale provision based on an unexpected
change in employment.”

Not quite understanding your "no sale in five years" statement, as I don't think that's the requirement. Here's more text from REV 625:

“Generally, homeowners who owned and used
their homes as their principal residences for
at least two of the five years prior to the date
of sale will qualify for the state income tax
exclusion.”

“To qualify for the exclusion, the
taxpayer could not have sold another principal
residence within the two years preceding the
date of sale of the current residence.”

So after those requirements, you have the unforeseen events language allowing the exclusion when the requirements aren't met. Hope this will be of help to you.

[HBurkholder]

I was wrong

about the "previous five years". However the quote is referring to a home that HAS met the use and ownership tests but is within two years of the previous sale. My situation is that the folks HAVE NOT met the 2 year use and ownership test but their move was job related. If I understand correctly they qualify for a reduced exclusion on the federal but I still do not see where PA addresses this. Perhaps I am dense or have dead brain cells. In rereading this brochure I am concluding that PA does NOT allow a reduced exclusion when the home is owned and occupied less than two tears irregardless of the reason for sale

[BP.]

Well, how about this reference then:

This is from the Q&A section of the PA DOR website:

"Question
Do I have to pay state income tax on the profit I make when I sell my home?

Answer
Most taxpayers will no longer be required to pay Personal Income Taxes on the gain on the sale of their principal residence, under a law that took effect January 1, 1998.

Generally, homeowners who owned and used their home as their principal residence for at least two of the last five years prior to the date of sale will qualify for the exclusion on a sale on or after January 1, 1998.
However, taxpayers would be required to report the gain if they sold their home within two years of selling their previous residence. If the sale of their home was required by unforeseen circumstance (change of employment status or health), they could exclude the gain."

I'm interpreting the phrase "if they sold their home within two years of selling their previous residence" as, "i.e., they don't meet the 2 year use and ownership test." Most of what I've read on the subject says that the only place PA doesn't conform to federal on this issue is the limit on gain ($500,000/$250,000); for PA there are no limits.

If you're not satisfied with your research, consider an e-mail to PA DOR customer service. They reply promptly sometimes. Good Luck!!