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.
Hello!
10 years ago my husband and I bought a house for my parents. It is legally our vacation house (second house) in GA (we live in MD). However my parents lived in it all the time (house was never rented.)
Now we want to move parents closer to us.
We are trying to figure out would we need to pay any capital gain tax if house in GA would be sold with gain of $30,000. How much that would be?
There are two possible scenarios for future.
1) Parents will rent in MD.
2) What happens if we will buy my parents another house in 2 years now in MD for more money than the house from GA.
Please help. I have read many IRS papers and got lost...
Your accountant will be the best resource to guide you through the tax liabilities ahead. He'll know how much depreciation you've taken, your cost basis, and so forth.
Buying another "vacation house" tax situation is again only answerable by your accountant who has access to your financial specifics.
Future scenarios do not matter in this situation for tax purposes. It doesn't matter whether parents rent or not or if another home is purchased with the funds.
What does matter is if the house was rented to the parents or not. Best to ask your accountant.
Hello!
10 years ago my husband and I bought a house for my parents. It is legally our vacation house (second house) in GA (we live in MD). However my parents lived in it all the time (house was never rented.)
Now we want to move parents closer to us.
We are trying to figure out would we need to pay any capital gain tax if house in GA would be sold with gain of $30,000. How much that would be?
There are two possible scenarios for future.
1) Parents will rent in MD.
2) What happens if we will buy my parents another house in 2 years now in MD for more money than the house from GA.
Please help. I have read many IRS papers and got lost...
selling a 2nd home is subject to long term capital gains. how much tax depends on all your other income added up with the gain. it is only a 2nd home and has zero to do with the fact your parents lived there . it could have been vacant for that matter and it is all the same .
if you are under roughly 74k in taxable income with the gain in that figure you can qualify for some or all of it maybe qualifying for zero long term capital gains.
so as an example :
using the older deductions and exemption numbers micahel kitces had worked up
imagine a married couple who have $50,000 of ordinary income, and then recognize a $50,000 long-term capital gain. They will each be eligible for a $3,950 personal exemption (a total of $7,900 for the two of them), and the $12,400 standard deduction. Thus, their total deductions will be $3,950 x 2 + $12,400 = $20,300, which means their ordinary income will be $50,000 - $20,300 = $29,700 and their $50,000 of long-term capital gains go on top.
From there, the ordinary income fills up the tax brackets first, which means the first $18,150 falls in the 10% ordinary bracket, and the next $11,550 is in the 15% bracket. From there, the long-term capital gains kick in, which means the next $44,100 are eligible for the 0% long-term capital gains rate (up to the $73,800 threshold that forms the top of the "0% capital gains zone.
Ultimately, thanks to the favorable stacking sequence, the couple’s total tax bill will be only $18,150 x 10% + $11,550 x 15% + $5,900 x 15% = $4,432.50, or an effective tax rate of only about 4.4% on $100,000 of total income!
i think you are considering the fact it was your parents primary in the equation so you should get some exclusion but the answer is no . it was only a 2nd home to you and a house guest in regards to them being there..
Don't forget the depreciation recapture. It applies whether you depreciated the house during the 10 years or not.
There is always the chance of doing a 1031 exchange for the new property to defer all taxes. You need to talk to your accountant.
They didn't take depreciation - it was never a rental.
The best advice is to pony up and speak to a CPA. I would suggest speaking to him/her about the possible next transaction if you move your parents closer. He/she may suggest a way to structure the transaction that avoids or at least minimizes capital gains.
You Need Professsional Direction no opinions off a chat board..
Quote:
Originally Posted by sunsprit
Your accountant will be the best resource to guide you through the tax liabilities ahead. He'll know how much depreciation you've taken, your cost basis, and so forth.
Buying another "vacation house" tax situation is again only answerable by your accountant who has access to your financial specifics.
but you still need to PAY For Professional Direction..if there is ever an issue you dont want your back up to be... well I read it on the CD chat board..OMG
Quote:
Originally Posted by mathjak107
i think you are considering the fact it was your parents primary in the equation so you should get some exclusion but the answer is no . it was only a 2nd home to you and a house guest in regards to them being there..
They didn't take depreciation - it was never a rental.
Oops. Missed that. Slapping my forehead in lieu of an emoticon. Too old for that and am male.
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.
