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Old 02-27-2015, 10:45 AM
 
Location: NC
6,575 posts, read 8,008,745 times
Reputation: 13495

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I've been reading about capital gains taxes for sale of real estate. Now that the one time exclusion for seniors is gone, those taxes really take a bite.

For example one may live on a farm that has appreciated greatly in value due to a lot of work for a number of years. As a single person, to make improvements you must do twice the work of individuals in a couple, but you will have only half the financial resources to use for it. Still, when the property is sold, most of the yield will be taxable as capital gains and the single's exemption of 250K will only be half of what a couple gets.

Is it true that it would be better to sell a property as soon as the 250K profit is reached? It seems that every bit of value added after that is going to have a huge chunk go to taxes. This is especially hard for senior singles who lose out on a lot of other benefits allowed for couples.
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Old 02-27-2015, 10:59 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,658 posts, read 40,029,981 times
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Remember these excess gains will be LONG TERM Gains (not taxed very high unless you are a high earner). I have done a few props that exceeded the $500k gain and still able to keep effective US IRS taxes below 10%.

Are you planning on any 'partial sales / split' of original property?

You can 'split' original parcel (that was part of OR adjoining your primary residence and take $250k every 2 yrs. (Many farmers do this...one neighbor did 5 parcels in 10 yrs).

You can also deed separate parcels to your kids / heirs / charities you plan to contribute and they can get a 'step-up basis' and take gains tax free. (within estate rules)

If you want to keep it all as a single piece, then you will be limited to a $250k capital gain exclusion (as a single person).

another option is to 1031 (like kind exchange... Strict RULES apply) your gain into something more easy to sell in chunks of $250k gain.
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Old 02-27-2015, 12:26 PM
 
Location: NC
6,575 posts, read 8,008,745 times
Reputation: 13495
The idea of 'splitting' and receiving this benefit never occurred to me. That is a tremendous help if it would work for me. Definitely something to look into. The StealthRabbit rules!
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Old 02-27-2015, 12:52 PM
 
Location: Albuquerque NM
1,662 posts, read 1,530,329 times
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You can also deduct sales expenses and substantial improvements that add market value, prolongs its useful life, or adapts it to new uses. I'm not sure how many substantial improvements would be made to a farm or land. But for a house, this would include remodeling, new heating and cooling system, new roof, new hot water heater, landscaping, new fence, etc. It would not include ordinary maintenance and generally not painting. I keep all my home improvement and major repair receipts.
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Old 02-27-2015, 02:11 PM
 
Location: in the miseries
3,302 posts, read 3,584,621 times
Reputation: 3810
You can also give the buyer a mortgage on the excess and get payments over time.
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