Do you have to pay capital gains taxes if you reinvest in real estate?

Answer 1

Stockpicker is correct, but I'm not sure if we're understanding the question correctly.

The question is ambiguous. Charlie, what do you mean "pay taxes if you reinvest"? Reinvesting is not an activity that creates a tax liability. Selling an asset at a profit is what creates a tax liability. Okay, let's assume that what you mean is that you sold an asset that resulted in a capital gain. Now you want to know if you can avoid the cg tax on that transaction by reinvesting the capital by purchasing another asset. Right?

Sorry about being anal here, but the distinctions are important.

My tax accountant has instructed me (and I also have a bachelor's degree in businees, accounting major) that if you have sold a residence at a profit, there is no cg tax liability up to some limit. I'm unaware of that limit, because it is way more than an amount that would be applicable to my personal finances. I would guess that $250K may be right, but it may actually be much more than that. I don't remember what my accountant said, because I had no vested interest in remembering the amount. Besides, the tax codes are frequently changed, and what was true 6 months ago may not be true today.

Now, if you sold a REAL ESTATE INVESTMENT property for a gain, congratulations! :) You CAN avoid the tax liability if you reinvest the capital in another real estate investment. There are some restrictions (check irs.gov or with a tax accountant for a reliable answer), which I believe include that the reinvestment must occur within one calendar year. There may be others.

If you sold a property for $500K, and reinvest by purchasing a property for $200K, you may have only reduced your cg tax liability by 40%...but that's just my speculation.

Hope this helps.

Answer 2

it used to be that you had 90 days to reinvest but not anymore. since 1997 you are exempt up to 250,000 if single and 500,000 for married. but you must have lived there for 2 years. if not you pay thru the snoot

Answer 3

seem right into a section 1031 replace. that isn't evade the tax chew yet will defer it. If this is a lengthy time period earnings, the speed is 15% or a lot less, not 30%. once you're ultimate in on the 12 months reduce for little while period effective aspects, carry off on ultimate till you're over 12 months. That way it will be a lengthy time period CG on the decrease price.

Answer 4

It depends on your situation. I think if you have lived at the property and it was your main residence for 3+ years you won't have to pay taxes. But if you are just buying and selling houses for a living, you have to pay taxes. Check your state laws. Uncle Sam wants like 30% of your profit.

Answer 5

Okay...that's why he's a student.
IRS says that if it is your primary residence, there are not capital gains taxes up to $250,000 in profit. (My numbers may be off...but I think that is correct.)
Now, if it is a secondary residence or rental property/investment property, then you will pay at the rate of capital gains according to your income level and offsets, up to 35%, I believe.

Answer 6

Sometimes you don't have to. For example, you could do a 1031 exchange. But, like most investment matters it can be complicated. Talk to an expert.

Answer 7

http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html

Answer 8

maybe

Answer 9

yes.................