What are the pros & cons of buying a house & reselling it within a year?

Question

Are there any tax consequences from buying a smaller & less expensive house that was bought within the year. We sold our first house that was built in the 70's, when homes were less expensive, so made a profit. I believe we can take a one-time tax write-off on the profit. After paying the commission & advertising costs we would like to sell our present house for the price we bought it six months ago. The home is too large for us (2 people) & takes too much upkeep. We want to down-size without paying any profit/loss. We'll have to house-hunt, re-pack & move everything & unpack again, but wonder if there will be any large monetary expenses involved.

Answer 1

Pro(s): You paid off a mortgage! Looks great on your credit report, if payments were made on time every month. You got rid of a debt.

Con(s): You will pay capital gains taxes on this home if you did not live in it as your primary residence for two of the past 5 years, unless you can cancel out the profit you made with repairs, maintenance, etc to break even. (Basically, if you made $50,000 profit, but you added a $25,000 swimming pool, $10,000 kitchen renovations, $10,000 landscaping, $5,000 roof, then you broke even.)

As always, consult with a realtor, the attorney who is/will handle the closing, and a tax adviser/preparer.

good luck!

Answer 2

Realtors take a good chunk, especially if you paid one going in and out.. there must be transfer taxes as well.. however, if your current house is not working for you, it might be worth taking the small loss and moving into something less expensive to keep up.. Do the math - figure the carrying costs.. ie taxes, heat etc of where you are living and compare against what it might be otherwise.. and multiply out by how many years you expect to stay there.. I usually add 10% for misc expenses too.. if you are selling for the price you bought it at, you won't need to worry abt income taxes as you will have no profit, you might even be able to deduct a loss if it comes out that way - pencil to paper first - good luck
ps - you might want to do a little house hunting first and see what you might expect - you don't want any surpirses

Answer 3

If you sell it for what you paid for it, you're not getting a profit, so there's no tax expenses. (I assume we're talking about the U.S.A.) However, you will have to record it on your taxes and keep records of your costs and proceeds, as well as other repairs, etc. done, so that you can prove that you don't have a profit. You could even get a small write-off if you sell it at a loss after all your costs, I think. Talk to an accountant. Also, obviously, the cost of the realtor is not negligible.

Answer 4

Yeah, you would might want to take a loss in case you want to promote now, fantastically once you concentration on brokers' costs. you isn't able to ask for more advantageous than the builder is promoting his new houses for, and the vacant a lot would scare off some skill clients. you're able to break even if you stay for a minimal of yet another year or 2, or perchance lease out the domicile till the market improves. Sorry. you could continually record with an agent now in simple terms to work out what occurs--you're lower than no legal responsibility to pay or promote till you get the deal you want. good success!

Answer 5

The expenses involved in getting the property to market. Costs that are involved in the transaction itself. Other expenses like having a Realtor sell your house.

Why not try to rent it? Then the money that you get could possibly offset the mortgage payments and in the end, see appreciation in the market.

Homes are only increasing in price, so it could be a great investment.

But to answer your question, just normal expenses that involves real estate transactions.

Answer 6

Linda, if you sell your house, you will pay capital gains. Look into something called a "1031 Exchange". You might want to get a duplex and use your rental money for retirement purposes.

Regards

Answer 7

A tax expert can answer your question thoroughly.