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What is the hardship provision?

In certain circumstances, taxpayers will be able to take a portion of their otherwise regular $250,000 ($500,000) nontaxable gain on the sale of their home if they qualify for the hardship provision. This is an exception to the two out of five-year requirement and will be provided to taxpayers that are forced to move out prior to them meeting this ownership and use requirement.

The hardship provision will be provided to those who are required to sell their home due to a health issue, a change in place of employment, or any other unexpected circumstance. Under this provision, the taxpayer may still take a prorated portion of their nontaxable gain for the prorated time in which they have lived in their residence.

For example, if a single filing taxpayer would normally be subject to a $250,00 nontaxable gain had they met the two out of five-year ownership and use requirement but were required to move out prior to two year due to a qualified hardship, they will be able to take a nontaxable gain for the portion of the two years in which they lived in their home.

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