If I sell my house that I am currently in, and receive some money in a check for the equity.......am I going to have to pay capital gains on that money?

I am buying another house but don't plan to put the proceeds from the current house into the new one. I want to take the money and pay off some other debts and maybe do some more mods to my truck. Is this going to create a bad tax situation for me next year when I am doing 2005 taxes? Any help would be appreciated.

 

you will be in the same situation i am in. as long as you have lived in the home that you are selling for more than 2 years and you don't make over $250,000 (if your single) or $500,000 (if your married) off of the sell of your home. then you don't have to pay captial gains taxes.

hope this helps

britt

 

T-7 is correct. 2 of the past 5 years is the key; the house had to be your primary residence for 2 of the past 5 years.

State taxes, however are a different story and you might want to call a tax company in your state to see what state repercussions you might have.

 

Thanks a bunch gentlemen! That is what I thought (and hoped) the answer was going to be, but didn't know the part about 2 out of 5 years.

I have lived in my current house as my only and primary residence for 3 years.


And, uhhhhhh..........I believe my sell on the house will net somewhat less than 250K.

 

You can also keep the money and use it as "tax-defered" for more real estate, as long as you use the money within 6 months to buy more real estate. Any of that money you DON'T spend on the new real estate can then be taxed.

This is considered a real estate exchange

 

4x4not,

Are you saying they are going to tax my proceeds from the sell of my house as "income" if I don't "defer" it into more real estate?

 

no... you can do whatever you want to with it. it is yours if you meet the criteria stated earlier.

britt

 

4x4 - That's the way regular home sales used to be, but now it applies to investment property, including rentals and the like. Though, if you've owned a place for 5 years, lived in it for 2 and rented it for 3, it still qualifies as a primary residence for capital gain purposes. Just remember, 2 of 5!

Confused yet?

 

OK, Joel......just for clarification.....because I am still confused...

You keep saying 2 of 5. I haven't owned my house 5 years. I have owned it for 3 years only..........but lived in it all 3 as my only residence. Is it going to present a problem that I haven't owned it 5 years?

Thanks everybody for the info.

 

No, you only have to have lived in it as your principle residence for a total of 24 months out of the last five years to qualify for the exemption.
So if you lived there for three years.....you're good to go.

 

I didn't think it also applied to investment property.
I thought it was only for properties that qualified under the "2 of 5" clause.

 

The $250k exemption really pisses me off. It should be indexed based at least on inflation, if not based on housing prices.

I paid $310k for my house including improvments. I plan to live there for anywhere from 10 to 30 more years. At the current rate of housing price increases, I will exceed the $250k exemption within 10 years.

If I buy another house in 10 years, the price of another house will have gone up just as much. If I have to pay capital gains, I will actually lose money on the transaction. Yes, I gained equity in my house, but that equity does no good if all houses have gone up in value/

Brian Elfert

 

The period of interest is the past 5 years. In that 5 years, you have to have lived in your house for 2 of those years. So, if you've lived in your house for the past 3 years, you qualify. You don't have to have owned it for 5 years, that's just the period they use for the capital gains determination. If you've owned it for 20 and rented it the entire time, you could move back in for 2 years and have it qualify as your primary residence for capital gains purposes.

SH -Investment property qualifies IF you move back in and live there for 2 years. But, there are some other things that go with that, too, like if you've taken depreciation. Not sure exactly how that factors in - I'd have to talk to a tax expert if I had a rental and then moved back in.

Being in the military and buying and selling houses fairly often, I pay attention to this capital gains stuff... though it didn't apply to the stupid house I just sold in TX. Anyway, we have some other leeway, too, based on our orders; I think we get 2 of 10 maybe. I haven't owned a rental yet (looking maybe to get a house here with an eye to renting when I move), so I haven't had to pay close attention to that one.

 

if your married then the exemption is $500,000. something to think about. but i understand what your saying.

britt

 

The 2 of 5 rule does not mean a continuous period of time.
If you stayed in your house for 6 months a year for the last 5 years, that would equal 30 months which is > 24 and you'd still qualify for the deduction.