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Old 04-08-2016, 09:18 PM
 
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Quote:
Originally Posted by Petunia 100 View Post
It doesn't matter if it is your first home or not. The limit is 250k single, 500k mfj. Anything above that is subject to capital gains tax.
Petunia, IIRC there was a first home exemption a long time ago.
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Old 04-09-2016, 02:23 AM
 
Location: Silicon Valley
3,617 posts, read 1,631,616 times
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I'd imagine the problem with selling the home in the SF Bay and moving mostly on equity is that it's a one way ticket out. When you cash out, you can't move back. So you're leaving your network, friends, possibly family to go live someplace new. After a certain age, it gets harder to reestablish friend and colleague networks, especially if the goal is to not work someplace.

Even as a kid I remember CA money rolling into S. Dakota. Our little town had a couple homes on the outskirts that were ridiculously priced. Literally 5-8x what all other homes would go for. All built by someone coming into the area to build their castle, and realizing that the wage difference was so dramatic that they couldn't even heat the thing. So then they go to sell, but no local is dumb enough to buy their mistake...until along comes another person from CA, flush with cash.

Of course, it may be my turn to be that very same dumb CA money at some point, but I'm going to try really hard to keep those lessons in my head and not make the same mistake.
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Old 04-09-2016, 05:37 AM
 
12,020 posts, read 5,130,833 times
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I'll be selling my house in CA and moving in 5 years to retire in KY. I'll use the equity in my current house to buy a small 2 bedroom 1 bath in KY for only about $60,000. My dream home believe it or not is a smaller older house in a quaint old town. I've been wanting to do this for many years and this will be my opportunity.
As far as culture shock goes, bring it on. I want a slower pace of life in a more conservative atmosphere where people still love this country and respect each other and going to church isn't something strange.
I don't need much money or a big house on a lake to be happy.
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Old 04-09-2016, 05:50 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,935,948 times
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One thing no one has mentioned in any detail is the possible tax or similar consequences of very large capital gains when you sell a house. Some - like the relatively new 3.8% Medicare tax - might affect people regardless of age or retirement status. Others - like Medicare "high income" surcharges - will only affect people on Medicare. Of course - there are both federal and (possible) state capital gains taxes to deal with as well. And some jurisdictions have real estate transfer taxes (sometimes called "mansion taxes") too. Really pays to do some tax and similar planning before selling - or even deciding on a sale price. Robyn
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Old 04-09-2016, 06:09 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,935,948 times
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Quote:
Originally Posted by Larry Siegel View Post
Petunia, IIRC there was a first home exemption a long time ago.
Best I recall - prior law allowed you to keep rolling your gains over into newer more expensive houses. It also allowed a smaller one-time exemption for 55+ owners:

Capital Gains and Your Home Sale | Fox Business

There were IIRC some benefits for first-time homeowners - but they were incentives to buy - not sell.

In any event - the $250/500k exemption is what we have now.

FWIW - anyone who is interested in doing this should - if they haven't done so already - start putting together a file to document expenses they've incurred over the years that will adjust the basis of their house. Things like the cost of a new roof. The higher the basis - the lower the capital gain. There are items that can reduce the basis too:

Determining Your Home's Tax Basis | Nolo.com

One reason it's important to keep a hard copy file is any computer program you may be running now may not be the program you're running when you sell. Also - financial transactions that are "in the cloud" may only be available for limited periods of time. When my brother sold his house a few years ago - well he had most of his financial transactions on a computer program that wouldn't run on his newer Apple computers. He had to come to my house to use one of my older Windows computers to get his data.

Robyn
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Old 04-09-2016, 07:04 AM
 
Location: Close to an earthquake
890 posts, read 677,754 times
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Good advice Robyn and I agree. One thing to keep in mind for those who might have some income tax to pay from a gain in excess of $500,000 is that we should "never let the tax tail wag the economic dog" because nobody is in the 100% tax bracket so a dollar of profit doesn't cost a dollar of tax. Having said that, tax planning might help mitigate the income tax from a large primary residence capital gain. Those who are sitting on some unrealized losses in their investment portfolio might be able to harvest capital losses by selling some investment holdings to offset the gain.

Once again, never let the tax tail wag the economic dog.
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Old 04-09-2016, 07:06 AM
 
71,651 posts, read 71,777,271 times
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Quote:
Originally Posted by Robyn55 View Post
One thing no one has mentioned in any detail is the possible tax or similar consequences of very large capital gains when you sell a house. Some - like the relatively new 3.8% Medicare tax - might affect people regardless of age or retirement status. Others - like Medicare "high income" surcharges - will only affect people on Medicare. Of course - there are both federal and (possible) state capital gains taxes to deal with as well. And some jurisdictions have real estate transfer taxes (sometimes called "mansion taxes") too. Really pays to do some tax and similar planning before selling - or even deciding on a sale price. Robyn
the ramifications of selling anything with a sizable capital gain are pretty harsh .

if you go high enough capital gains taxes are 20% plus the medicare surcharge tax , you are likely to trigger the amt tax on all other income which is particularly painful .

you can see a huge jump in medicare even if not retired or ion a medicare yet if you sell . medicare goes off your taxes two years prior .

we just got hit with a medicare inccrease of 300 a month for my wife , it would have been 600 a month if i was on it too .

we sold an investment in 2014 and tripped all of the above .

it isn't the end of it either , if you have a state tax they do not recognize special capital gains rates and if you pay enough state tax in because of the gain , the deduction can trip the amt the following year again even without a big income .
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Old 04-09-2016, 08:50 AM
 
26,591 posts, read 52,313,328 times
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I have an older wiser friend that just passed... he never sold property... only held or exchanged and built up a nice portfolio of income producing commercial property.

I sold one of my rentals held with partners and did not do a 1031... never heard the end of it... saying what a setback it was especially at my age losing out on future growth.

Another friend moved back into his rentals... he had 5 of them and over about 20 years sold them all in the SF Bay Area and maxed the 500k couple exclusion... retired to a nice home on the Nevada side of Lake Tahoe... no State income tax... said it is much better to pass away in Nevada than California... know a couple of Silicon Valley Executives that worked out retirement transfers to Nevada so certain tax offsets came in as this was a work related move... even my CPA retired to Nevada.
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Old 04-09-2016, 08:58 AM
 
71,651 posts, read 71,777,271 times
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many retirees are like us . they don't want to be landlords in retirement so 1031's are not even a thought .
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Old 04-09-2016, 09:00 AM
 
39,277 posts, read 20,371,115 times
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Quote:
Originally Posted by mathjak107 View Post
we had a 2nd home in pa in the pocono's . the area is doing awful . we sold the house 3 years ago , it was no place we wanted to retire to
Yep, at one time the Pocono's was considered a beautiful area. Our area at one time did well but now it's dilapidated and people are leaving due to lack of jobs and high taxes.

Anyway, my plan is to sell my house and get as far away. I have the funds to buy but I'll probably rent for awhile, when the house sells, bank the money. I'm not sure which angle I'll go.
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