I am selling a triplex and I have lived in the largest of the three units more than 2 out of the last 5 years. We bought in 2010 for $450K, and our adjusted cost basis is currently $462K (after capital improvements and depreciation). We are in escrow now and the purchase price is 1.175M, so there is a considerable gain.

I understand my wife and I will get up to 500K in homeowner's capital gain exclusion, but that only applies to the unit we actually lived in, not the entire property.

My question is: Do I calculate my homeowner's exclusion on 33.33% of the gain? Or on 39% which is the square foot percentage of the unit I lived in?

Thank you for your help!

I understand my wife and I will get up to 500K in homeowner's capital gain exclusion, but that only applies to the unit we actually lived in, not the entire property.====>correct. In general, when you sell your primary residence and you have lived there for 2 out of the last 5 years, you can exclude from federal income taxes the gain from the sale up to $250k if you are single, or $500k if you are married.You?ll have to allocate a percentage of the property as a whole to your primary residence and then determine whether you owe taxes on the sale of your home.


My question is: Do I calculate my homeowner's exclusion on 33.33% of the gain? Or on 39% which is the square foot percentage of the unit I lived in?=>>correct; you need to also recapture the unrecaptured sec 1250 depreciation as ordinary income taxed at regular tax rate.