My employer will build a house and allow my family to live in it rent free. We will sell our house. We will make quite a bit when we sell our house. Since we won't be reinvesting in a house, I am wondering how to avoid taxation.
2006-07-20 06:50:08 · 9 answers · asked by pandjnewton 2 in Business & Finance ➔ Taxes ➔ United States
You should re-invest it in rental property. Then it becomes a buisiness and a write-off.
2006-07-20 06:54:12 · answer #1 · answered by Sara B 4 · 1⤊ 0⤋
The first $250,000 ($500,000 if married) is tax free. Assuming you are in the U.S. check out the rules at IRS.gov.
Also, be aware that the free rent that you will be getting is considered W-2 income from your employer and taxes and social security and medicare taxes will have to be paid on the "fair market rental value".
Furthermore, since you will no longer be making equity in your home, I strongly suggest that you take any proceeds from the sell of your home and invest it into a good mutual fund. That way you will have the best of both worlds: Free rent (less the taxes) and an increasing investment..
Hope that this helps.
*******BE VERY CAREFUL WHO YOU LISTEN TO HERE*****
There are a lot of wrong advice here: (Can't avoid it, put it into a rental property.......) Watch out!
2006-07-20 06:58:19 · answer #2 · answered by RunningUte 3 · 0⤊ 0⤋
The law changed in 1998. There is a $250,000 tax exemption for capital gain on the sale of a house. The rollover no longer applies. So if you are married, you can take a $500,000 profit without paying taxes. This is good every two years, as long as you personally lived in the house as your principal residence.
Check out the Ray Lucia radio program or Raylucia.com as he talks a lot about this and has a great group of people including a tax attorney on his show. Be well.
2006-07-20 06:56:47 · answer #3 · answered by Bear 4 · 0⤊ 0⤋
Two options. First, if the profit is under $500k, then their isn't any tax ($250K if single). Or you can turn it into a rental property and earn some additional income and get some great tax savings.
You do understand that you will be getting taxable income from living in that house. Consult a tax advisor.
2006-07-20 07:36:40 · answer #4 · answered by extra_37 4 · 0⤊ 0⤋
You can avoid capital gains tax on proceeds from the sale of a house up to a certain level. Go to www.ustreas.gov and look at the IRS rules to get specific information.
2006-07-20 06:54:57 · answer #5 · answered by zartsmom 5 · 0⤊ 0⤋
you can refer to IRC section 121, or search for principal residence.
You need to ask your tax advisor since your employer is providing house for you and the FMV of the rent is part of your imcome and it is taxable.
Basically, the 500k excemption for joint return in every 2 year is true as long as the sold house is your principal residence.
2006-07-20 10:10:58 · answer #6 · answered by tw9812 1 · 0⤊ 0⤋
you cannot avoid it. You have two years to turn it over....then if you dont reinvest it, you have to pay tax on it. My mom is a mortgage broker, and I just asked her. Good luck.
2006-07-20 06:54:45 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Listen to RunningUTE!
Very bad advice on this site
2006-07-20 07:15:06 · answer #8 · answered by 3eleven 4 · 0⤊ 0⤋
you can never avoid taxes
2006-07-20 07:10:39 · answer #9 · answered by Anonymous · 0⤊ 0⤋