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Old 04-30-2007, 10:19 PM
 
Location: Montana
2,203 posts, read 5,988,657 times
Reputation: 1022
Default Or another way to put it . . .

Quote:
Originally Posted by texasdreamin View Post
Thanks for all of the info. Fact is, my home is almost paid for. By the time I'm ready to retire and sell it, it will be worth about $750k. I wanted to pull $250 out for retirement and take the rest and build my new home. I just had no idea how to do that. Can I take that $500k and bank it until I am ready to build? I thought I had two years but then started hearing dribbles of things about 1031 exchanges, not realizing it was for investors only. I'm not an investor. I just want to know if I can sell my property and sit on the money until I can get my plans drawn and take care of other necessities toward the build of the new home. Sorry for being so dense about this. I figured there would be loads of info coming in from those of you with experience. Thanks so much.
Texasdreamin - not to worry. Under the old tax law you did have to reinvest money from the sale of your home into another home within 2 years, or else you'd owe capital gains tax on it. Several years ago, the govmt changed the tax law. No capital gains tax on the sale of your primary residence unless you've made too much profit (over $250k if single, over $500k if married).

Ex. 1 Say you bought your home for $250,000 back in 1990. You sell it in 2007 for $750,000. If you're married, you owe no taxes on your $500,000 profit. You can take that money and do whatever you'd like with it. As you mentioned, pocket part of it, and use the rest to build a new home. If you're single, then you'll owe tax on $250,000.

Ex. 2 You bought your home for $100,000 in 1985. You sell it for $900,000. If you're married you'll owe tax on $300,000 ($800,000 profit - $500,000 exclusion = $300,000)

It makes no difference if you reinvest your money into another home (primary residence) or not.

You'll probably want to talk to your accountant for advice about tax & estate planning that's tailored to your own particular situation.
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Old 04-30-2007, 10:21 PM
 
678 posts, read 1,980,650 times
Reputation: 187
Sorry olecapt...I'm a "girl" and I think I'll keep my money I've already left too much of it in Vegas in the past

I'm better understanding this, now. Does anybody know how long I have from the time I sell til the time I have to put the money into my new build, so I won't have to pay taxes? The only money I plan to take out of it is the $250k. I know it use to be that you had to purchase another property at or above the amount you sold for, to keep from having to pay taxes, within a two year period.
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Old 04-30-2007, 10:24 PM
 
678 posts, read 1,980,650 times
Reputation: 187
Gretchen, thanks. We were posting at the same time and you basically answered my question. I got it, now. I was singing "Happy Day"...until I realized I am going to have to pay. I'll have to pay somewhere around 90K in taxes. Money I'll have to deduct from my new home. Boo hoo. Thanks all. I truly appreciate all of your info and help. Best to you.

Last edited by texasdreamin; 04-30-2007 at 10:33 PM.. Reason: Had to change my singing from "Happy Day, to Boo Hoo"
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Old 06-09-2007, 02:35 PM
 
41 posts, read 183,256 times
Reputation: 35
I just read this thread for the first time. I want to buy land, build a house, and sell it. Will I have to pay capitol gains taxes on it if I roll my profit into another land investment? If I understand correctly, I won't have to pay taxes if I keep rolling my profits into properties. If I eventually live in one of my investments for 2+ years then I won't have to pay taxes at all. Essentially, I could spent the next 10 years rolling profits into property after property and when I decide to retire from it all then I just move into my property and live in it for 2 years then cash out?

Is this true all across the country? I live in Washington.

Last edited by cspeaker; 06-09-2007 at 02:35 PM.. Reason: added last question
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Old 06-09-2007, 03:11 PM
 
Location: NW Las Vegas - Lone Mountain
15,757 posts, read 19,993,769 times
Reputation: 2661
Quote:
Originally Posted by cspeaker View Post
I just read this thread for the first time. I want to buy land, build a house, and sell it. Will I have to pay capitol gains taxes on it if I roll my profit into another land investment? If I understand correctly, I won't have to pay taxes if I keep rolling my profits into properties. If I eventually live in one of my investments for 2+ years then I won't have to pay taxes at all. Essentially, I could spent the next 10 years rolling profits into property after property and when I decide to retire from it all then I just move into my property and live in it for 2 years then cash out?

Is this true all across the country? I live in Washington.
You have broken the code.

True everywhere with respect to Federal Tax. You may have some state or local tax but it is likely minor. Most states follow the federal rules.
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Old 06-09-2007, 03:44 PM
 
Location: Somerset, NJ
505 posts, read 1,523,602 times
Reputation: 128
Quote:
Originally Posted by texasdreamin View Post
Gretchen, thanks. We were posting at the same time and you basically answered my question. I got it, now. I was singing "Happy Day"...until I realized I am going to have to pay. I'll have to pay somewhere around 90K in taxes. Money I'll have to deduct from my new home. Boo hoo. Thanks all. I truly appreciate all of your info and help. Best to you.

Keep in mind...you can also add ANY improvements made to the home while you've lived there (hot water heater, new roof, new kitchen, new tiles, new pool, new you get the point) to what you paid for the home.

For instance, you bought the home for 100,000 and put 150,000 worth of upgrades and additions over the years, and sell if for 750,000...you owe no capital gains tax at all.

Does that make sense?
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Old 06-09-2007, 04:04 PM
 
Location: NW Las Vegas - Lone Mountain
15,757 posts, read 19,993,769 times
Reputation: 2661
Quote:
Originally Posted by joeymarine View Post
Keep in mind...you can also add ANY improvements made to the home while you've lived there (hot water heater, new roof, new kitchen, new tiles, new pool, new you get the point) to what you paid for the home.

For instance, you bought the home for 100,000 and put 150,000 worth of upgrades and additions over the years, and sell if for 750,000...you owe no capital gains tax at all.

Does that make sense?
Careful here. In a rental situation it is almost always desirable to cast expenses as repairs rather than improvements. Repairs are simply a business expense and deducted from current income. Improvements add to the capital base and are depreciated over a term of years. If you expense a new water heater it does not add to the base.

In a primary residence situation the owner wishes them to be treated as an increase in the capital basis of the home.

So a new water heater may, or may not add to the capital base of a house.

I would not normally bring this up...but this thread deals with 1031 exchanges...
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Old 06-09-2007, 06:58 PM
 
41 posts, read 183,256 times
Reputation: 35
Quote:
Originally Posted by joeymarine View Post
Keep in mind...you can also add ANY improvements made to the home while you've lived there (hot water heater, new roof, new kitchen, new tiles, new pool, new you get the point) to what you paid for the home.

For instance, you bought the home for 100,000 and put 150,000 worth of upgrades and additions over the years, and sell if for 750,000...you owe no capital gains tax at all.

Does that make sense?
I see. Does that include new homes? If I build a new home with the bare essentials and improve on it over the 2 years that I live there, does that count?

Also, I wonder if you had other investments (besides your primary residence) and if you sold those investments to pay off your primary residence - would you have to pay capitol gains tax? And, further, what if you used that investment income to pay off an equity loan on your primary residence - would you have to pay capitol gains tax?
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Old 06-09-2007, 07:12 PM
 
Location: san francisco bay area
300 posts, read 1,368,385 times
Reputation: 150
Quote:
Originally Posted by cspeaker View Post
I see. Does that include new homes? If I build a new home with the bare essentials and improve on it over the 2 years that I live there, does that count?

Also, I wonder if you had other investments (besides your primary residence) and if you sold those investments to pay off your primary residence - would you have to pay capitol gains tax? And, further, what if you used that investment income to pay off an equity loan on your primary residence - would you have to pay capitol gains tax?

If you sell investment property--property that you have rented out--you have to pay capital gains tax. That doesn't mean you can't use the money you make on the sale to pay off you primary residence, but you still will have to pay capital gains on the investment property.
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Old 06-10-2007, 12:18 AM
 
41 posts, read 183,256 times
Reputation: 35
Quote:
Originally Posted by nooneknowsmyname View Post
If you sell investment property--property that you have rented out--you have to pay capital gains tax. That doesn't mean you can't use the money you make on the sale to pay off you primary residence, but you still will have to pay capital gains on the investment property.
So if I haven't rented the property out, is it still considered investment property? I plan on buying land, building a house, then selling. I thought that would be considered investment property. Is what I'm doing considered under the 1031 property exchange?
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