Thanks for your note!
If you use an accountant to file taxes, your accountant should know how to handle it. If you self-file using TurboTax, there will *probably* be a series of questions you answer that will enforce the safe-harbor provision. You would claim the deduction, and then keep good documentation (e.g. severance letter, unemployment benefit paystubs) in case you get audited.
Be sure to consult a tax advisor before making any decisions – I’m only sharing my perspective, but I can’t give you tax or legal advice. 🙂

-The third exception around unforeseen circumstances also has a safe harbor that kicks in anytime there is… a job loss that makes you eligible for unemployment benefits.

We haven’t lived in our house for two years. We moved in on 7/12/2019. My husband was laid off twice this year due to COVID and was eligible (and claimed) unemployment benefits. As I understand from the previous blog post and this one, that would mean that we have a safe harbor exclusion. If we sold, we do stand to sell for more than we paid. Is it automatic that the safe harbor applies, or I’m a little confused on how this ends up being reported like: “Oh, we see you were on unemployment in 2020!”

Thanks for this very detailed look. By far the most informative piece I’ve read on the topic!