Home capital gains for active duty military

/ Source: msnbc.com

Q: I am in the military and will be transferring to a new location in the next month or so. I recently sold my current home and made about fifty grand. I just put earnest money on a home at the new location. I plan to put 10 percent down on the property. This will leave me with approximately $19,000 left over. Is there a legal requirement to use this additional money on the purchase of the home in order to avoid capital gains taxes? — Capt. Brian M. , Elmendorf AFB, Ala.

A: No. In most cases, you’re allowed to exclude $250,000 on the capital gains from the sale of a primary residence ($500,000 if you’re married and filing jointly).

But you must meet certain conditions: you have to have owned the home for two years and used it as your primary resident for two of last five years. If you’re in the military, that five-year period can be suspended for up to 10 years.

For details, check out this page on the IRS Web site. Or get a copy of IRS  Publication 523, Selling Your Home.