I have lived in my home for less than the 24 months and might be foreclosed on. I lost my job in January, and cant make the mortgage payments. If they foreclose on me, can I qualify for the Reduced Maximum Exclusion?
Reduced Maximum Exclusion (per IRS manual)
If you fail to meet the requirements to qualify for the $ 250,000 or $ 500,000 exclusion, you may still qualify for a reduced exclusion. This applies to those who:
Fail to meet the ownership and use tests, or
Have used the exclusion within 2 years of selling their current home.
In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons.
A change in place of employment.
The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved.
Specific event safe harbors. Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home.
An involuntary conversion of your home, such as when your home is destroyed or condemned.
Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible.
In the case of qualified individuals (listed earlier under Qualified individual ):
Unemployment (if the individual is eligible for unemployment compensation),
I do have one of those ARM’s, but that’s not the reason. The payment has not jumped. The reason is because I lost employment, have had no money coming in and am insolvent 🙁