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spooks
So in love!
Member since 6/06 4378 total posts
Name:
Sarah
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Selling - Capital Gains Tax
We currently own a co-op but are looking at houses to buy - my friend said we have to won the co-op for at least two years even if the proceeds go into the purchase of the house, in order to avoid the 20% capital gains tax- does anyone know if that's right? If we're using the money from a sale to purchase do capital gain taxes still apply?
TIA!
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Posted 3/15/07 3:03 PM  |
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nixy
LIF Adult
Member since 9/06 1575 total posts
Name:
K
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Re: Selling - Capital Gains Tax
I beleive so.
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| Posted 3/15/07 3:05 PM |
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Re: Selling - Capital Gains Tax
Yes the new law states that you have to own the property for two years in order for it to be considered your permanent residence. After two years you can sell it, and as long as you do not get more then $250K profit off of the house you do not have to pay capital gains. If you are married I believe it is $500K. Anything over $250K ($500K for married) you will have to pay capital gains.
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| Posted 3/15/07 3:08 PM |
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spooks
So in love!
Member since 6/06 4378 total posts
Name:
Sarah
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Re: Selling - Capital Gains Tax
So if its less than $250K or $500 for married in profit only, then you do NOT pay capital gain tax?
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| Posted 3/15/07 3:13 PM |
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nixy
LIF Adult
Member since 9/06 1575 total posts
Name:
K
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Re: Selling - Capital Gains Tax
Posted by spooks
So if its less than $250K or $500 for married in profit only, then you do NOT pay capital gain tax?
Only after the 2 years.
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| Posted 3/15/07 3:18 PM |
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Re: Selling - Capital Gains Tax
Posted by nixy
Posted by spooks
So if its less than $250K or $500 for married in profit only, then you do NOT pay capital gain tax?
Only after the 2 years.
These rules only apply if you have owned the house or co-op for 2 years or more. If you sell before the 2 years all the money is taxed with capital gains tax (which I believe is around 25%).
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| Posted 3/15/07 3:21 PM |
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spooks
So in love!
Member since 6/06 4378 total posts
Name:
Sarah
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Re: Selling - Capital Gains Tax
Thank you bridget and nixy, I appreciate it!
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| Posted 3/15/07 3:26 PM |
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MrsBlueSash
Love my sailor
Member since 6/05 5793 total posts
Name:
Christian
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Re: Selling - Capital Gains Tax
If you sell before the two years isn't the amount pro-rated? Ex. if you live in it 6 mos you'll pay the cap. gains tax on a greater percentage of the profit than if you lived there 18 mos.
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| Posted 3/15/07 3:31 PM |
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Re: Selling - Capital Gains Tax
Posted by MrsBlueSash
If you sell before the two years isn't the amount pro-rated? Ex. if you live in it 6 mos you'll pay the cap. gains tax on a greater percentage of the profit than if you lived there 18 mos.
My lawyer and accountant did not tell me that, so I am not sure.
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| Posted 3/15/07 3:32 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Selling - Capital Gains Tax
can you rent it out for a while and then sell it? Or, do you need the proceeds to buy?
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| Posted 3/15/07 3:33 PM |
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Bxgell2
Perfection
Member since 5/05 16438 total posts
Name:
Beth
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Re: Selling - Capital Gains Tax
Remember, too, you are only paying capital gains on PROFIT. So, for example, let's say you purchase your home for $300k. You sell for $320k, then you pay capital gains for $20k.
Remember also, you can adjust your basis with any money you've spent on renovations. So, if you've put a considerable amount of money into renovations, that may offset any money you have to pay on capital gains.
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| Posted 3/15/07 3:35 PM |
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Re: Selling - Capital Gains Tax
Posted by Bxgell2
Remember, too, you are only paying capital gains on PROFIT. So, for example, let's say you purchase your home for $300k. You sell for $320k, then you pay capital gains for $20k.
Remember also, you can adjust your basis with any money you've spent on renovations. So, if you've put a considerable amount of money into renovations, that may offset any money you have to pay on capital gains.
Thank you this I did not know. Would you have to pay any capital gains on a gift of equity?
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| Posted 3/15/07 3:39 PM |
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ckone
LIF Adult
Member since 8/06 3014 total posts
Name:
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Re: Selling - Capital Gains Tax
Honestly, I believe that it's either after two years or if you roll ALL of the money int othe purchase of real estate you do not have to pay property gains. But, every penny has to go to the down payment, not closing, etc. You could always do that and ask for a sellers conssession at closing to get money.
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| Posted 3/15/07 5:23 PM |
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spooks
So in love!
Member since 6/06 4378 total posts
Name:
Sarah
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Re: Selling - Capital Gains Tax
Posted by ckone
Honestly, I believe that it's either after two years or if you roll ALL of the money int othe purchase of real estate you do not have to pay property gains. But, every penny has to go to the down payment, not closing, etc. You could always do that and ask for a sellers conssession at closing to get money.
I wasn't sure about that - if the proceeds from the sale go to the downpayment of another property whether its exempt from tax or not - that would be great if so.
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| Posted 3/15/07 8:52 PM |
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CookiePuss
Cake from Outer Space!
Member since 5/05 14021 total posts
Name:
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Re: Selling - Capital Gains Tax
This is the IRS code regarding primary residence and capital gains tax:
With the Tax Relief Act of 1997, the rollover or once-in-a-lifetime options were replaced with the current per-sale exclusion amounts which are $250,000 for a single filer or married filing single or $500,000 for married filing jointly. The home must be your primary residence and meet the ownership tests: You own and live in the home for two out of the five years before the sale and it doesn't have to be sequential. The IRS lets you aggregate your time living in the house to meet the two-year residency requirement and you don't have to live in the house at the time of the sale.
I hope that helps.
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| Posted 3/15/07 9:11 PM |
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Re: Selling - Capital Gains Tax
So as long as you live in the house as your primary residence for two years you can sell it after the two years?
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| Posted 3/16/07 9:04 AM |
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MrsBlueSash
Love my sailor
Member since 6/05 5793 total posts
Name:
Christian
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Re: Selling - Capital Gains Tax
Posted by Blu-ize
can you rent it out for a while and then sell it? Or, do you need the proceeds to buy?
I know for a fact (because I'm renting a property) that the rental time does not count toward the 2 years; it has to be you primary residence for two years to not pay cap. gains tax. I'm pretty sure rolling the money into another house doesn't forgo the tax either, but not as sure on this one.
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| Posted 3/16/07 10:05 AM |
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MrsBlueSash
Love my sailor
Member since 6/05 5793 total posts
Name:
Christian
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Re: Selling - Capital Gains Tax
Posted by shamrock124
This is the IRS code regarding primary residence and capital gains tax:
With the Tax Relief Act of 1997, the rollover or once-in-a-lifetime options were replaced with the current per-sale exclusion amounts which are $250,000 for a single filer or married filing single or $500,000 for married filing jointly. The home must be your primary residence and meet the ownership tests: You own and live in the home for two out of the five years before the sale and it doesn't have to be sequential. The IRS lets you aggregate your time living in the house to meet the two-year residency requirement and you don't have to live in the house at the time of the sale.
I hope that helps.
This is what we've done. I lived in a condo 19 mos, we bought a house. I rented it out. After the first renter left I used it as a primary residence whiel our had work done. Not fun to pay two mortgages but the agregate time is now more than two years.
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| Posted 3/16/07 10:07 AM |
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