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Old 11-09-2016, 10:40 AM
 
Location: PNW
12 posts, read 7,352 times
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Question about short-term capital gains tax on real estate. I’ve researched it online and have found conflicting info.

Some sites say if you are in the lowest tax bracket regarding regular income, you pay no capital gain tax for either short-term (owning/living in home less than a year) or long-term (owning and living in over one year).

Other sites say if you sell your primary residence after owning/living in it for less than a year, you will pay short-term cap gains tax regardless of your tax bracket, but after one year will pay no cap gain if you are in the lowest tax bracket.

Obviously, I will have to get some legal advice from an attorney or CPA, but in the interest of research thought I’d check in here and see if anyone has some input. Thanks.
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Old 11-09-2016, 11:15 AM
Status: "Real estate 4 life" (set 23 days ago)
 
Location: Just south of Denver since 1989
11,030 posts, read 29,811,111 times
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primary residence is handled differently than income producing property.

a lot depends on the reason for the move. https://www.irs.gov/pub/irs-pdf/p523...756.1478711588
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Old 11-09-2016, 04:17 PM
 
74,914 posts, read 74,400,637 times
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Quote:
Originally Posted by karhuguide View Post
Question about short-term capital gains tax on real estate. I’ve researched it online and have found conflicting info.

Some sites say if you are in the lowest tax bracket regarding regular income, you pay no capital gain tax for either short-term owning/living in home less than a year) or long-term (owning and living in over one year).

Other sites say if you sell your primary residence after owning/living in it for less than a year, you will pay short-term cap gains tax regardless of your tax bracket, but after one year will pay no cap gain if you are in the lowest tax bracket.

Obviously, I will have to get some legal advice from an attorney or CPA, but in the interest of research thought I’d check in here and see if anyone has some input. Thanks.
2 different issues .

the first issue pertains to long term capital gains of any sort that are qualified . a home that ends up having long term capital gains because you owned it at least 1 year but did not live there long enough to get the tax free primary residence exclusion can still qualify for the zero capital gains bracket .

if you do not qualify for the tax free exclusion on your primary residence because you are living in it less than 2 years but more than 1 year it qualify's as a long term capital gain , if including the capital gain you are in the 15% tax bracket , those gains would not be taxable on a federal level .

many states do tax you and do not have zero capital gains brackets like the fed ..


but remember that 15% tax bracket has to include that capital gain and all your other taxable income . for a couple the 15% bracket ends around 75k .

so first you put all your other income in the buckets . lets say it is 50k . you can then put 25k of long term capital gains money in the bucket and pay zero taxes on that gain . anything that spills out is taxed at the next marginal rate

Last edited by mathjak107; 11-09-2016 at 05:15 PM..
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Old 11-10-2016, 03:11 AM
 
74,914 posts, read 74,400,637 times
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Quote:
Originally Posted by 2bindenver View Post
primary residence is handled differently than income producing property.

a lot depends on the reason for the move. https://www.irs.gov/pub/irs-pdf/p523...756.1478711588
op is just confused because there are two different conditions being explained . both conditions are correct and apply to resi real estate
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Old 11-10-2016, 12:58 PM
 
Location: PNW
12 posts, read 7,352 times
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Thanks for the responses, very helpful. The IRS pdf explained exceptions to the rule, good to know. Mathjak, thanks for the in-depth answer. I read last night that reinvesting the profit within 45 days in another house negates capital gains, and that's my intent, so looks like I'm good to go.
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Old 11-10-2016, 04:26 PM
 
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nooooooooooooooooooooooooooooo . the 45 day rule has nothing to do with you . that pertains only to 1031 exchange's on investment property only . it has nothing to do with your personal residence being sold .

1031 Exchange Identification Timeline
Long before closing, you have to submit a written and dated list of the properties that you want to buy to your qualified intermediary. This identification list has to be finalized within 45 days, although you can submit it earlier and revise it up to that date. Generally speaking, investors list three properties that they are willing to buy and buy any one, two or three of them. If you buy a property that is not on your identification list or if you fail to submit an identification list, the IRS will disallow your exchange if they audit you and find out about it.
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Old 11-11-2016, 07:44 AM
 
2,952 posts, read 1,732,637 times
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1031 exchange - be VERY CAREFUL of who you use.

I've seen many of these companies take off with peoples money. It is an unregulated industry. Watch American Greed.

We ha a big one get away with about a 100 milion of other people money in Vegas a few years ago.
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Old 11-11-2016, 08:01 AM
 
74,914 posts, read 74,400,637 times
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op is talking a personal residence , a 1031 exchange is off the table .
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Old 11-12-2016, 04:42 PM
 
6,962 posts, read 8,417,271 times
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Quote:
Originally Posted by 2bindenver View Post
primary residence is handled differently than income producing property.

a lot depends on the reason for the move. https://www.irs.gov/pub/irs-pdf/p523...756.1478711588
Again, why are you moving? If it's job related--or a number of other circumstances--you may be eligible for a partial exclusion on the sale of your primary residence. If you qualify, a partial exclusion is essentially a prorated exclusion of your gain.
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