Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Now that we are moving after only owning our home for 6 months, can someone tell me how the capital gains tax will work? The move is job related but I'm not sure if that gets us out of paying capital gains all together or just lowers the tax we have to pay. This is assuming we make ANY money on selling this house Are Realtor commissions deductible???
We started our taxes the other day and I remember a question asking if we had lived in our house for 2 years or more. We use TurboTax, so I'm not sure what goes on behind the user interface when you answer "yes" or "no" to that question. I do know that we answered "yes" and in the end we didn't owe any taxes on our home sale. I'd recommend getting on the IRS web site and looking up the IRS form that addresses home sales.
Typically a home has to be your primary residence for 2 yrs. My parents are going thru this now. They had 2 homes in NJ.. one was primary , one was the "shore house". They sold their primary and bought a home in NC. BUT now the NC house is secondary and the "shore house" is primary and must be that way for 2 yrs before they sell it and make NC the primary home. Am I confusing you yet?
My parents CAN sell the other NJ house now if they so choose but they will lose a lot based on the profit they will make on it. That bring us to another question.... does it matter what size profit you are making ???? I know typically if you "make" any profit from a house sale of over $500K (that would be nice) then you are taxed on it. That pretty much excludes most of us LOL
I hope I helped you a tad. Speak to an accountant more on this for better info.
As I understand, if it is a job transfer then you do not have to pay capital gains (according to my Oregon Accountant). But if the job move is voluntarily, you leave a company for a new job then you "might" have to pay Capital Gains. (She's research that might for me right now... because we are in the might category.) You have to have lived in your home as a primary residence for at least 2 of the last 5 years.
The thing that gets me w/ capital gains is that in our case, basically the money we will be getting out of this house is the equity that we earned on the previous house where we lived for 6 years.
Someone on this board posted a really good link to a CG Caculator. Maybe do a search because I've lost that link.
BTW, if you think you will be moving back to NC in the next few years you could rent your NC house. As long as you live in it for 2 of the last 5 years then you do not pay CG. But most people don't have that sort of job crystal ball. With the way careers are these day, I really think CG gets middle class folks more than anyone else. (Ok, enough of my vent.)
Someone on this board posted a really good link to a CG Caculator. Maybe do a search because I've lost that link.
Regarding capital gains, I didn't know it tied into a job relocation. We'll have to check to also with our accountant.
Here's the link:
http://www.cufs.org/calculator4.asp (broken link)
If you do a 1031 exchange on investment property, you can transfer the money into a trust account and reinvest it into a like-kind property without a tax hit. You cannot personally receive the proceeds, and you must designate the next property within 45 days.
With a primary residence, you must have lived in the house for 2 of the last 5 years to be exempt from capital gains, as a pp said. However, if you lived there less than 2 years, you only pay tax on the gain, less any expenses you incurred buying and selling the property in the first place. In other words, the tax is not on the equity you have in the house, but the difference in appreciation from when you bought it to when you sell it.
Example: You buy a house for 200k, then sell it a year later for 220k, and pay fees/commission of 13k. Your gain would be 20,000 - 13,000 = $7000. Capital gains tax rates of 15% are favorable compared to regular income tax, so you'd have a tax burden of $1050. Of course, if you had any other expenses involved in the sale of the house, or if you did certain upgrades to the house, that could lessen your tax bill even more.
(This is extremely simplistic, I'm not an accountant or a tax expert, this post is not to be construed as legal advice, please consult a professional.)
Question for you...If you reinvest in another home within a certain lenght of time, say 6 mos or 2 yrs.; Doesn't that exempt Capital Gains?
If you're talking about primary residence, I don't think so. As long as you've lived in the home for at least 2 of the last 5 years, you're scott free on the first 500k in gains, whether you reinvest or not. If you've lived there a shorter time, then you've got tax implications. A pp mentioned that if it is a job transfer, there may be exemptions. I've got to research that some more, but otherwise, you can't reinvest in another property without taking the hit.
The 1031 like-kind exchange may be what you've heard, with the exchange of investment property, like if you sell a rental and use the proceeds to buy another one, or two more that equal that amount. There are very specific rules that need to be followed, and a very short amount of time allowed between the two, but you can shelter the gains that way.
We are getting our taxes done next week. I'll ask the CPA and let you know what I find out.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Are Realtor commissions deductible???
