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This is incorrect based on the new tax laws on vacation homes that took effect 2009.
A vacation home converted to a primary has the tax exclusion pro-rated now.
so if you owned that home a total of 10 years and 5 were spend as a part time vacation home and 5 as a primary you would only get 1/2 the allowance for the tax exclusion. instead of 250k you would only be allowed 125 tax free.
the 5 year rule only applys when the homes were 100% primary and no vacation home time.
Oops; yeah, you're correct. Busy watching the hockey game and didn't read the post as thoroughly as I should have.
the whole question of taxes on a sale are not that cut and dry if it isn't a primary that is excluded. for one thing that amt tax is triggered by high capital gains.
once the income from the gain is added to your regular income you can eat up the amt deductions and be left with a very painful tax.
we typically get hit with an extra 13-15k in amt taxes over and above what they should be based on a 15% capital gain tax and our income when we sell a property.
the whole question of taxes on a sale are not that cut and dry if it isn't a primary that is excluded. for one thing that amt tax is triggered by high capital gains.
once the income from the gain is added to your regular income you can eat up the amt deductions and be left with a very painful tax.
we typically get hit with an extra 13-15k in amt taxes over and above what they should be based on a 15% capital gain tax and our income when we sell a property.
it gets worse. because we live in nyc we also get slammed on state and local taxes too.
well that big chunk being mailed in with our taxes gets to be taken as an itemized deduction the following year.
that huge deduction trips the amt again the following year just on normal income. it becomes a 2 year deal.
ouch is right.
we are going to get hit again this year. we were partners with real estate mogal bernard spitzer in some very pricey lease rights on commercial property by central park which we sold in march to an investor group. the taxes we will owe are insane.
that is why no one here can tell the op much about his tax liability.
For those who never had the pleasure of triggering the amt tax they don't figure it in any calculations unknowingly.
It may work out under the new rules that since you would own the vacation house a total of 9 years and used it as a primary two years out of the 9 that you would only get 2/9's of the total exclusion on the vacation home turned primary.
We would have run in to that issue if we made our vacation home our primary and then sold it.
Thanks for your long explanation and link. Turns out it's not as cut and dry as we thought. Still we will at least get something when the time comes. And again, we may decide to keep it much longer so won't address it either, or as soon.
it gets worse. because we live in nyc we also get slammed on state and local taxes too.
well that big chunk being mailed in with our taxes gets to be taken as an itemized deduction the following year.
that huge deduction trips the amt again the following year just on normal income. it becomes a 2 year deal.
ouch is right.
we are going to get hit again this year. we were partners with real estate mogal bernard spitzer in some very pricey lease rights on commercial property by central park which we sold in march to an investor group. the taxes we will owe are insane.
that is why no one here can tell the op much about his tax liability.
For those who never had the pleasure of triggering the amt tax they don't figure it in any calculations unknowingly.
Yeah, NYC taxes are no joke. Not as familiar with the commercial side of things, as it would relate to this particular deduction; could you not just amortize your deduction as opposed to taking it all at once? I know you can do this on the residential side but not so sure if possible for a commercial property.
when it comes to the taxes you owe there is no amortization on the payment ,it is what ever it is . perhaps you are thinking in terms of getting paid over time from the buyer?.
You need to consult a tax attorney. Your taxes on capital gains depends on your age, too because there is an allowance I think for retired people. Also, there is something called a 1031 Exchange where you can buy a replacement house that you can rent out. Do you just want to sell and keep the money? Unless you have a pressing need for the money, you will still have to invest it in some way - CD rates are laughable, then you have the annuities, etc. Maybe, you can buy another place and rent it out.
you get a bigger exemption at 65 but it really has nothing to do with the capital gains just your overall tax rate. but once you hit the amt phase out all your expemptions and deductions do not count .
all you really need to do is run it through turbo tax and you will get an idea. most folks who want to sell a vacation home are are rarely into exchanging for another property.
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