Easing the Financial Burden of PCS Moves
Permanent Change of Station (PCS) moves are a fact of life for active duty military members, especially those stationed near Travis Air Force Base in Fairfield, California. PCS moves can also bring significant economic hardship to military families, especially when selling a home in areas like Travis Air Force Base, Dixon, Fairfield, or Vacaville, California. The financial strain of relocating, coupled with potential capital gains taxes, can add stress to an already challenging transition. This article aims to ease that burden by providing clear, accessible information on the Military Capital Gains Tax Exclusion, helping service members in Solano County and nearby areas like Vallejo and Suisun City understand how to potentially limit or avoid capital gains taxes when selling their principal residence. Our goal is to empower military members with knowledge to make informed financial decisions during PCS moves.
Federal Capital Gains Exclusion Rules
The Military Capital Gains Tax Exclusion is governed by federal law, as outlined in IRS Publication 523. Homeowners can exclude up to $250,000 of capital gains ($500,000 for married filing jointly) on the sale of their principal residence if they meet two tests:
- Ownership Test: Owned the home for at least 2 years during the 5-year period ending on the sale date.
- Use Test: Lived in the home as a principal residence for at least 2 years during that 5-year period.
For active duty military personnel near Travis Air Force Base, the Military Family Tax Relief Act extends the 5-year test period to 15 years during “qualified extended duty.” This applies to service members in the Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, NOAA, Public Health Service, Foreign Service, Peace Corps (outside the U.S.), or intelligence community, who are:
- On active duty for more than 90 days or indefinitely.
- Stationed at least 50 miles from their principal residence or living in government quarters under orders.
Even with this extension, the 2-year ownership and use tests must be met within the 15-year period for a full exclusion. If not, a partial exclusion may apply, particularly for PCS moves in areas like Fairfield or Vacaville.
Partial Exclusion for Qualifying Events
If a military member sells their home before meeting the 2-year requirement due to a qualifying event, such as a PCS, they may qualify for a partial Military Capital Gains Tax Exclusion. Qualifying events include:
- Permanent Change of Station (PCS).
- Health-related reasons.
- Other unforeseen circumstances (per IRS guidelines).
A non-qualifying event, such as selling for personal convenience or financial reasons unrelated to service, does not qualify for a partial exclusion. The partial exclusion is calculated as:
Exclusion = (Weeks owned and used / 104) × Maximum exclusion amount
For example, a single service member in Solano County who owned and used their home for 52 weeks (1 year) before a PCS could exclude (52 / 104) × $250,000 = $125,000 of capital gains. This is particularly relevant for military families relocating from Travis Air Force Base.
California Conformity with Federal Rules
California conforms to federal rules for the Military Capital Gains Tax Exclusion, as noted in FTB Publication 1032. This means military personnel in Fairfield, Vacaville, Vallejo, or Suisun City can benefit from:
- The 15-year test period extension for qualified extended duty.
- Partial exclusions for PCS-related sales.
While California aligns with federal law, consulting a tax professional in Solano County is recommended to confirm state-specific details.
Scenarios and Examples
Below are scenarios illustrating how the Military Capital Gains Tax Exclusion applies for service members near Travis Air Force Base:
| Scenario | Details | Qualifying Event? | Exclusion Outcome |
|---|---|---|---|
| Sold after 1 year, PCS | Owned and used home for 52 weeks, sold due to PCS, single filer. | Yes (PCS) | Partial exclusion: (52/104) × $250,000 = $125,000 |
| Met 2 years within 15 years | Owned and used home for 2 years 5 years ago, on extended duty, now selling. | Yes (Extended duty) | Full exclusion: Up to $250,000 ($500,000 if joint), if tests met within 15-year period. |
| Sold after 6 months, no PCS | Owned and used home for 26 weeks, sold for personal reasons, single filer. | No (Personal reasons) | No exclusion: Does not meet 2-year test and no qualifying event. |
Practical Resources
Military personnel in Solano County can access specialized resources to navigate the Military Capital Gains Tax Exclusion:
- MilTax: Free tax services for Armed Forces members and veterans.
- Military OneSource: Guidance on military tax impacts.
- Consult a tax professional in Fairfield or Vacaville for personalized advice.
Partner with a Military PCS Real Estate Expert
For military families navigating PCS moves near Travis Air Force Base, Joshua Anello, a U.S. Air Force Veteran and Realtor, has been a trusted expert since 1997 experiencing multiple PCS moves himself. Based in Dixon, Joshua specializes in helping Travis AFB service members buy and sell homes in Solano County, including Vacaville, Vallejo, and Suisun City. His deep understanding of military relocations and the Military Capital Gains Tax Exclusion ensures families maximize their financial outcomes during transitions. Contact Joshua for expert guidance tailored to your PCS needs.
Disclaimer
This article is for general knowledge and not to be considered tax advice. Verify all information with a licensed tax professional to ensure compliance with federal and California tax laws.
Citations
Joshua Anello
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