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Thank you Mathjak107. I knew I had seen it spelled out like this but could not find the reference. Nice to know I was correct even though it most likely will cost me money.
Thank you Mathjak107. I knew I had seen it spelled out like this but could not find the reference. Nice to know I was correct even though it most likely will cost me money.
Very much appreciated.
you cannot imagine how may have argued this point in the forums out of ignorance of the rules .
so many do not know the rules changed in 2007 . you see them telling people to move in to their rental or 2nd home all the time and then take the full exclusion because they lived there 2 years .
that used to be the case but that loop hole was closed .
I have a friend who sold two houses in 2016 which she had moved back and forth from for almost 20 years She said both her realtors told her all she had to do was come up with 2 out of 5 years and she was home free. One she rented when she wasn't there and the other stayed empty.
I pointed out to her about the secondary and she said she will just pick a tax preparer at the end of the year and let them figure it out but she knows she will not owe any tax. She sold both of these at the first of the year so seems she would have had to pay some to IRS at that point. I'm interested to see how this works out.
I'm a planner to a fault so I am still in the house I had the question on but will be selling it soon. I am so glad to know for sure how to handle it because even with everyone insisting I was fine because of the 2 out of 5 ruling it was a nagging thought that I knew I had read that ruling and knew we would have to pay.
The silly part is we are retired and once I did the forms for the current year just to see how we might come out we owed very little. The bad part was making soc sec taxable but I look at it this way. You don't pay capital gains unless you made money. So if I have to pay say 15% tax, I still have 85% of it. Sure, I would love it all to be not taxed but this still would work out decently. And who knows what the rulings will be to effect 2017.
if your income allows it you may fit it in the zero capital gains bracket and owe zero tax .
on the other hand if the gain is large it can be a tax disaster as the top rate is 20% on capital gains plus an almost 4% surcharge . plus that can trigger the amt tax so it can be very painful .
we did just that in 2014 . we triggered every tax penalty and surcharge because we sold an asset and had a huge capital gain .
plus while we were not retired yet , the sale triggered medicare premium jumps 2 years later of an additional 300 bucks a month each . medicare goes back 2 years to set your premium whether you are retired or not .
if your income allows it you may fit it in the zero capital gains bracket and owe zero tax .
on the other hand if the gain is large it can be a tax disaster as the top rate is 20% on capital gains plus an almost 4% surcharge . plus that can trigger the amt tax so it can be very painful .
we did just that in 2014 . we triggered every tax penalty and surcharge because we sold an asset and had a huge capital gain .
plus while we were not retired yet , the sale triggered medicare premium jumps 2 years later of an additional 300 bucks a month each . medicare goes back 2 years to set your premium whether you are retired or not .
I have to thank you for this tip on Medicare and have decided to liquidate our income properties before age 63. I did discuss this with our accountant last year and it seems she is unaware that the loophole for rental properties has been changed. She teaches accounting at a local college, and she should know better. We had planned to do an exchange on one property and do a flip in a vacation area. I'll be seeing her next Saturday and will discuss it further with her. She may be fired. It's unfortunate because our capital gains will be substantial on the one property.
I'm hiding as much income in plain sight as I possibly can before I reach 62 mathjack. Unfortunately it's stagnant money as well. You're right, it's complicated.
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