Answer

I am in the military and have been forced to sell my house. I will realize a net profit of approx. $27,000. I will be moving to a base that I will only be at for two years so buying another house is not a good option. I would like any information and guidance you could provide on capital gains tax. I have heard I would be exempt for two years and possibly longer while I am in the military. I would like to invest this in mutual funds or common stock. I have very little experience in investing, this is really the only savings I have.

I am not aware of any specific capital gains rules for military folks. There may be. Do you have a command financial specialist that you can check this out with? As for the general capital gains rules in effect, there is no tax on capital gains for gains of $250,000 or less for singles and $500,000 for couples. You must live in the house for at least two of the five years prior to its sale in order to qualify. Otherwise, the exclusion is prorated according to your holding period. You can take this tax break every two years. As for where you should invest your $27,000, what is your time frame for needing this money? If it is less than 5 years, I'd avoid stocks or growth funds and go with less volatile choices such as Treasury notes, CDs, or a short term bond fund.