Cash or finance?

[Rose Red]

^^^Honestly - I wish I could leverage more and invest more but I'm just not a risk taker, never have been. Investing, to me, is serious business and since I know little I take little risk and stay in my comfort zone.

Right now I wonder where people are investing there money. The newspapers are all doom and gloom so where do people invest? Stock, Real Estate? To confusing.

[Soccersupporter]

Originally Posted by blademan

Home buying: Which is best........finance or cash if one has the money?

We could have bought our house cash when we moved to TX but opted to take out a small mortgage just to have the tax advantage. Our plan is to be completely debt free by retirement (10-12 years) but for now having a small mortgage works for us.

[stacylee926]

SO... here is a question that has always bugged me... just in case I win the lottery or something .

If a married couple buys a house for 600k cash, then they sell it again in 3 years (assuming appreciation also), isn't that cash they receive going to be taxed again - because they can only take up to 500k tax free from a home sale?

I am guessing that as long as the home never tops $500k sales price, or you never have more than $500k coming to you at the sale of the house you are fine.

Personally, I cannot imagine having most of my money tied up in a house. I would want it where I could get it quickly if there was an emergency - ie loss of job, major illness etc.

[Soccersupporter]

Originally Posted by stacylee926

SO... here is a question that has always bugged me... just in case I win the lottery or something .

If a married couple buys a house for 600k cash, then they sell it again in 3 years (assuming appreciation also), isn't that cash they receive going to be taxed again - because they can only take up to 500k tax free from a home sale?

I am guessing that as long as the home never tops $500k sales price, or you never have more than $500k coming to you at the sale of the house you are fine.

Personally, I cannot imagine having most of my money tied up in a house. I would want it where I could get it quickly if there was an emergency - ie loss of job, major illness etc.

I can answer that since I just went through this when selling our house in CA in 2007. You are right that if you make over $500,000 you will be taxed. However it is not that simple. If you are smart you save every receipt for every improvement you make on your house while living there, new flooring, additions, remodels, anything that adds value to the house. By doing this we were able to pay a minimum in capital gains when we sold. It still hurts to pay any capital gains but the potential profit far outweighs the negatives. It is complicated and I would advise anyone that has to deal with capital gains from a home sale to have a professional due you taxes.

[simcity]

Originally Posted by stacylee926

SO... here is a question that has always bugged me... just in case I win the lottery or something .

If a married couple buys a house for 600k cash, then they sell it again in 3 years (assuming appreciation also), isn't that cash they receive going to be taxed again - because they can only take up to 500k tax free from a home sale?

I am guessing that as long as the home never tops $500k sales price, or you never have more than $500k coming to you at the sale of the house you are fine.

Personally, I cannot imagine having most of my money tied up in a house. I would want it where I could get it quickly if there was an emergency - ie loss of job, major illness etc.

You are only taxed on the capital gain, but there is a waiver on the 1st $250k for one person if property is owner occupied for 2 years or more, and waiver of $500k in gains if occupied by married couple for 2 years or more (assuming you bought the property while married).

So, if married couple bought property for $500k and sold for 1M$, your capital gains would be $500k but it would be tax free! Sale would have to exceed $500k in capital gains for capital gains tax to accumulate. However, any capital losses you have will offset the capital gains. I have a wonderful $319k in capital losses from stock sales (glorious margin calls), so I probably won't be paying any capital gains taxes for a while.

As Soccersupporter was saying, your capital gain on sale of your home is the selling price minus your cost basis. The cost basis is your purchase price, plus qualified purchase costs, improvements and selling costs, minus any accumulated depreciation, say for a home-based business. Yep, your CPA can help you calculate your gain if you are not sure what qualifies and what doesn't.