Tax implications on sale of a home. (investment, construction, properties)
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My mother owns a single family house in queens, NY in a multi-family zone. This house is currently rented out for a bargain. The house was built in the 1930s and is currently in poor condition. Our plan was to rebuilt it into a multi-family dwelling. Construction would be very expensive not to mention time consuming. We also do not have the upfront capital to afford this construction.
Our neighbor next door has recently made an offer to purchase our house. He would like to combine the two properties and build on it. If we decide to sell, we intend on purchasing an existing, already built 2 family house with the equity we acquired. The intention would be to also rent it out.
My questions is... How will we be taxed if we reinvest our money in another property?
Unless you arrange for a 1031 exchange, your gain will be taxed at the capital gains rate, which is a favorable rate. An exchange would merely defer your taxes, not eliminate them. Since there's a possibility that capital gains tax rates will go up, it may be best to simply take your profit now.
My mother owns a single family house in queens, NY in a multi-family zone. This house is currently rented out for a bargain. The house was built in the 1930s and is currently in poor condition. Our plan was to rebuilt it into a multi-family dwelling. Construction would be very expensive not to mention time consuming. We also do not have the upfront capital to afford this construction.
Our neighbor next door has recently made an offer to purchase our house. He would like to combine the two properties and build on it. If we decide to sell, we intend on purchasing an existing, already built 2 family house with the equity we acquired. The intention would be to also rent it out.
My questions is... How will we be taxed if we reinvest our money in another property?
Thanks in advance.
When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes.
"Most people are not going to have a tax obligation unless their gain is huge," says Bob Trinz, a senior tax analyst at RIA, which provides tax information and software to tax professionals.
before May 7, 1997, the only way you could avoid paying taxes on your home-sale profit was to use the money to buy another, more-expensive house within two years.
Best to research online, I found the above info out in 30 seconds, Once you get info go to a tax professional or tax accountant for advice and to find out what works best for you. Learn about it first, Even professionals will give you wrong info if they don't know the correct info because some people always swear that they are right no matter how wrong they are.
When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes.
"Most people are not going to have a tax obligation unless their gain is huge," says Bob Trinz, a senior tax analyst at RIA, which provides tax information and software to tax professionals.
Best to research online, I found the above info out in 30 seconds, Once you get info go to a tax professional or tax accountant for advice and to find out what works best for you. Learn about it first, Even professionals will give you wrong info if they don't know the correct info because some people always swear that they are right no matter how wrong they are.
Except it's NOT a primary residence. They are already renting the property .
When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes.
"Most people are not going to have a tax obligation unless their gain is huge," says Bob Trinz, a senior tax analyst at RIA, which provides tax information and software to tax professionals.
before May 7, 1997, the only way you could avoid paying taxes on your home-sale profit was to use the money to buy another, more-expensive house within two years.
Best to research online, I found the above info out in 30 seconds, Once you get info go to a tax professional or tax accountant for advice and to find out what works best for you. Learn about it first, Even professionals will give you wrong info if they don't know the correct info because some people always swear that they are right no matter how wrong they are.
it is a rental property .
even if they convert it to their primary for a few years the exclusion is prorated by the number of years they owned vs the number of years it was their primary .
It is your mom's house. It is a rental. If she sells there is no 250,000 exclusion for capital gains.
She should seriously consider a 1031 exchange since it will stay investment property. Then she should somehow make sure the new property goes to heirs when she dies without needing to go thru probate. (I am no expert, it may need to go through a trust?) At that point the actual value will become the new cost basis and whoever inherits will not have to pay the delayed capital gains. Anyhow that is how I understand it, admittedly never having done this. There are brokers who specialize in this.
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