I bought a home in AZ (as a second home) in March 2005. I was told that if I sold the home 2 years later, you would not have to pay capital gain taxes on this. Is this true?
I bought the home for $180,000 and the going market value is about $240,000.......
Please help! I don't want to pay capital gain taxes on this home.. Are there any other options?
2006-06-22 08:01:29 · 4 answers · asked by just me000 4 in Business & Finance ➔ Taxes ➔ United States
Wait, I rent this property out....
2006-06-22 08:12:09 · update #1
I don't want to buy another house.. I already know the "exchange 1031 rule".. I just want to take the money to the bank.. Are there any other options??
2006-06-22 08:13:04 · update #2
I do not think that you have any other options... sorry to be the bearer of the news... but you might want to see if you can declare this as a primary residence... you are really reaching on this one.
There are essentially 2 types of applicable exchanges:
A 1031 exchange and a Section 121 exchange.
You know from your question what a 1031 exchange is. If you need more informaiton feel free to check out my site (I'm launching next week, so the site will grow soon to help you with your needs):
http://www.1031store.com
A section 121 exchange is for a primary residence and allows 250K after 2 years for single 500K for married. Key term here is a primary residence.
Your renting the place. If you have claimed the income on your taxes or have depreciated the property, you are in the realm of a 1031 exchange... the way it works... please don't hate me for it.
I've estimated your gain to be as follows:
http://www.1031store.com/resources/1031_capital_gains_calculator.php?check=form&original=180000&grossprice=240000&improve=&sellingexp=12000&depreciated=6000&staterate=5.04&payment=&payment=&payment=&payment=&payment=&payment=
I'm releasing the site next week, but very relevant as a source. I'm not the end-all-be-all... but...
Hope this helps...
2006-06-22 10:06:04 · answer #1 · answered by starke222 4 · 0⤊ 0⤋
You will have to pay capital gains on the sale of a second home. It doesn't matter how long you've owned it. It's a vacation home. The good thing for you is that capital gains is a lower percentage of your income than it has been in the past. You will also be able to deduct any expenses in selling it, upkeep, your purchase price, etc. I can help with advice when you get ready. I've gone through this twice already, myself!
2006-06-22 16:31:09 · answer #2 · answered by Nani 4 · 0⤊ 0⤋
If you use the proceeds to buy similar property you will not have to pay taxes. If yo lived in the home for two of the last five years you can take a one time exemption on paying capital gains on property sold.
2006-06-22 15:05:36 · answer #3 · answered by Anonymous · 0⤊ 0⤋
If you put the money back into another house within a year, you will not have to pay capital gains taxes on it.
2006-06-22 15:12:11 · answer #4 · answered by Anonymous · 0⤊ 0⤋