Are there any good strategies for reducing your tax liability when selling a home? Had to move for work but was unable to sell my home as the market dropped and I was too far underwater. IRS only gives you a few years before the sale is no longer protected from capital gains as main home. 


True, that you have reinvest the proceeds of your house sale into another property within 2 years after selling to avoid capital gains. I have never heard of a "successfull" strategy to avoid this from happening.


If your underwater, you really have three options that I'm aware of:


1. Sell and take the loss

2. Rent it out and wait for the market to improve

3. Buy and hold if your money situation allows it. 


I have had to relocate for work twice, both times selling a home and buying another one. I usually purchase another house very shortly after selling, as I hate the idea of renting. I've been lucky because (dumb luck) I always bought when the market was low, and sold when the market was high. And with my job my employer provides relocation so my closing costs and realtor fees and always reinbursed back to me once I file the paperwork.