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Currently the capital gains tax kicks in on the sale of a primary residence at $250,000 (profit) single or $500,000 married. My house has gone up enough in 4 years that I could reach that threshold. My question is, at what point would you sell and purchase another house to avoid paying taxes?
If I wait until it is $300,000, I'd owe capital gains on $50K but if my profit is $250K I'd owe nothing and effectively re-set everything to zero on another house. Also, depending on who wins the election, I suspect that capital gain taxes could go up.
The various transaction costs of buying and selling a house are the biggest consideration here. There's the 5.5-6% paid to the real estate agent, on the entire amount, plus all the myriad closing costs and moving costs. Only when the 23.8% (thanks Obama) on the profit above $250K would be greater than that is it worth selling to reset the exemption.
You can use any improvements to raise the cost basis. New roof. Windows & doors. Flooring. Paint. HVAC. Water heater. Appliances. Anything permanently attached to the house.
I don't know if this applies in every state/situation, but isn't there a loophole of sorts where you can roll the capital gain into another home purchase and not pay the tax?
Let's say you sold and had a $300,000 capital gain, less 250K exemption, leaving a $50,000 net gain. Rather than pay taxes on that you could buy a house about $50,000 more than the selling price of the old one without having to pay taxes.
Currently the capital gains tax kicks in on the sale of a primary residence at $250,000 (profit) single or $500,000 married. My house has gone up enough in 4 years that I could reach that threshold. My question is, at what point would you sell and purchase another house to avoid paying taxes?
If I wait until it is $300,000, I'd owe capital gains on $50K but if my profit is $250K I'd owe nothing and effectively re-set everything to zero on another house. Also, depending on who wins the election, I suspect that capital gain taxes could go up.
Yeah but you're leaving 30/35,000 simply because you don't want to pay taxes. Why would you do that? It becomes incinerated. Go buy a IRA and lower that tax bracket
Yeah but you're leaving 30/35,000 simply because you don't want to pay taxes. Why would you do that? It becomes incinerated. Go buy a IRA and lower that tax bracket
Probably not applicable. I'm not a tax accountant but that capital gains amount would be well over the income to deduct IRA contributions.
You can use any improvements to raise the cost basis. New roof. Windows & doors. Flooring. Paint. HVAC. Water heater. Appliances. Anything permanently attached to the house.
If I decide to stay another 10 years, I think I'll put in a pool and at least enjoy it!
I don't know if this applies in every state/situation, but isn't there a loophole of sorts where you can roll the capital gain into another home purchase and not pay the tax?
Let's say you sold and had a $300,000 capital gain, less 250K exemption, leaving a $50,000 net gain. Rather than pay taxes on that you could buy a house about $50,000 more than the selling price of the old one without having to pay taxes.
it has not worked like that for many many years .
that was the only way at one time you could avoid paying on the sale. today they did away with that and every one just gets an exclusion with no rolling over .
Currently the capital gains tax kicks in on the sale of a primary residence at $250,000 (profit) single or $500,000 married. My house has gone up enough in 4 years that I could reach that threshold. My question is, at what point would you sell and purchase another house to avoid paying taxes?
If I wait until it is $300,000, I'd owe capital gains on $50K but if my profit is $250K I'd owe nothing and effectively re-set everything to zero on another house. Also, depending on who wins the election, I suspect that capital gain taxes could go up.
they already did go up and burned many who deferred . they went from 15% to a top effective rate now of 24% all in one year .
the new top rate is 20% plus a 4% healthcare surcharge .
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