Capital gains tax ??

[dislal]

Can anyone help me understand what kind of money if any, you have to pay if you are making a pretty big profit on your property. I have been googling info tonight and I am still confused--If we have lived here 16 years DH and I I think as long as we don't make over $500,000(as a married couple) we don't have to pay the tax, right?

If we wouldn't owe capital gains tax, is there some other kind of tax we would owe? State? Government?

I know I probably sound stupid, but I really don't know anything about this and I need to know, before I can make a decision?

TIA

 

[dislal]

Bumping this to see if anyone can help me

 

[ols386]

We sold a piece of property that we owned, right next to the lot where our house is. We paid a fairly hefty capital gains tax, and we make well well under $500,000/year. Although I'm calling it a capital gains tax, I'm not 100%sure if that is actually the correct name for it, but we definitely paid a (what I consider to be ) high tax on it.

 

[monkeybug]

I don't remember the exact details of the law, but when we sold our house about 3 1/2 years ago we did not have to pay capital gains, and we made a substantial amount in profit (but well under 500,000). If I am remembering correctly, two of the reasons we qualified to not pay were that we had lived there longer than 2 years (we lived there 3) and were moving due to a job transfer. If you've lived there for 16 years you should be good.

 

[CKBear]

If the house has been your primary residence for more than 2 years then you do not need to pay taxes on the profit from the sale as long as the profit is less than $500k for married and $250k for single.

I have never sold a house where the profit was anywhere near these amounts, but my understanding is if it is more than the $500k, you would only pay on the amount over $500k, so say the profit was $600k, you would only pay on the $100k, the first $500k would still be tax free.

 

[hoosll]

Capital gains tax can be offset if you turn around and spend the money on a new primary residence or a husband and wife are allowed $500,000 exemption from the tax ... there were some exemptions for age but those may no longer exist ... you should consult with your realtor or a CPA (accountant)

 

[barkley]

a cpa can also look to what is truly "profit" on a home sale. there are things like realtor commissions, credits back to the buyer and such that can lower what is profit. not sure if it's still the case, but it used to be that certain capital improvements to a property could be used (if you had receipts) to lower what was considered "profit".


as far as state or local taxes-check for your individual state. while we live in a state that does not have an income tax we do have an "excise" tax on real estate transactions-the state gets .0128% on sales (and some transfers) but the cities and counties can tack on more. the kicker is while capital gains taxes for the feds get done at "tax time", here if you don't pay up within 30 days of the sale you get hit with penalties.

 

[AndyLL]

Since 1997 you can you are excluded if it is less then 250000 single and 500000 family if it is your principal residence.

Prior to that there was a one time 125000 exception.

In all cases if you buy another house within 2 years ( i believe ) the capital gains is only the difference in price.

Andy

 

[golfgal]

You can also deduct any improvements to the house from your "profit" to reduce how much you actually made on the house.

 

[Cheshire Figment]

If the home has been your principal residnece and you have owned it four at least two of the last five years the first $500,000 of profit on the sale is not subject to Federal Income Taxes. Most State Income Taxes are based on the Federal numbers, so you prrobably will not have any State Income Tax on it either.

The basic formulas are:

1. Contract Sales Price less certain closing costs = Net Sales Price.

2. Initial contract price plus certain closing costs plus capital improvements during the period of ownership = basis.

3. The amount of contract selling price and the sum of (basis plus expenses of sale) is reported on Schedule D as gain and then there is a subtraction of the lower of the amount of gain or $500,000. Anything above the $500,000 is taxable as LTCG.

Mike (CPA Retired)

 

[arminnie]

In all cases if you buy another house within 2 years ( i believe ) the capital gains is only the difference in price.

Andy

I'm pretty sure they did away with that exemption when they changed the tax law.

I know lots of people who left a tiny house in California had to buy a mansion when they moved to another part of the country. before the law changed.

I sold my condo in CA for a LOT more than I paid for it, but once I counted the improvements and selling costs it came in under the $250,000 for a single person. I paid no tax at all to any entity.