When you sell your house, do you really HAVE to reinvest the profit within 3 years or else???

Question

I sold my house earlier this year and split the profit with my ex. I have heard that I have to reinvest my profit into another house within 3 years .... or .... something - I think that I will be taxed heavily on that money.

He said he found evidence online that you DON"T have to reinvest it.

feedback?

we had our house for 3 years and 3 months.

we made less than $100,000 on it.

Answer 1

If you profited from the sale of your house, you have to pay taxes on your profits if they exceed $250,000 for a single person or $500,000 for a married couple. If you did not profit this amount than the proceeds are exempt from taxation. However, you have to live in the house for a minimum of 2 years prior to the sale in order to qualify for this exemption.

Answer 2

The previous tax rule you may want to avert paying capital positive aspects on the sale of your position in case you rolled the income to a clean residing house replaced in 1997. That replaced into more effective than 10 years in the past. (income averaging went away more effective than twenty years in the past, yet I nonetheless get requested about that too.) The $250/$500K exclusion is a a lot more effective deal. in case you do not qualify for the exclusion, the income *is* taxable. See IRS e book 523. That e book *does* upward push as a lot as date each and every three hundred and sixty 5 days. (i wager i'm aggravated that a minimum of 0.5 the posts have reported you may avert the taxes by reinvesting the income. not authentic. This replaced may seventh, 1997.)

Answer 3

As long as you used the house for two out of a five year period it qualifies as your personal residence. As such you each could exclude $250,000 of gain from being taxed. Since the gain is less than the $250,000 each you don't even have to report the sale.
The reinvestment period you are referring to is for property that the government takes. You then would have three yearws to reinvest to avoid tax.

Answer 4

if you and your ex lived in the house for 2 of the 5 years prior to the sale, capital gains up to $250k for each of you ($500k) total are exempt from federal taxes. if you did not, you will be taxed at long term gains rate of 10% if you held the property for more than a year or the short term rate of 15% if you held it less than a year. any competent tax advisor should easily unravel this for you. good luck.

Answer 5

I thought it was also relative to the length of time you held the property and for how long it was your main place of residence. You should no have to pay capital gains on your own home, profit or not.
I may be wrong in your case, the laws where i come from however, preclude the main residence from CGT.

Answer 6

My wife used to work for a CPA and she said the tax it heavily as a Capital Gains Tax.

Answer 7

Capital gains tax is applicable on the profit you made.

Answer 8

Yup, you have to reinvest the money or else pay tax.
You can use it for any type of investment, insurance, or set up a trust.