i purchased a house in 1991, i moved to a new house in2004, i refinanced the first house in order to have the down payment for my new house. my son lives in the old house and pays the mortgage even though it is still in my name because he couldn't get financed to buy it. will i owe capitol gains tax when he finally is able to get financed. i'm not claiming this house when i file.
2006-12-12 11:14:48 · 5 answers · asked by jerry l 1 in Business & Finance ➔ Taxes ➔ United States
True the rule states that you must have lived in the house 2 of the last 5 years you owned it so that means as long as you sell the home to your son prior to 2009 then you will not owe any capitals gains if your capital gains are under $250,000 for Single or $500,000 for Married filing Joint. Sale Price - Cost Basis.
Right now you can set up a sale and carry the contract have him pay interest to you. You will have to claim the interest as income until he gets financing on his own.
Otherwise as it is now it is more than likely considered rent and you should be reporting that on your income tax, because he is free to move out anytime.
2006-12-13 07:49:15 · answer #1 · answered by T D 2 · 0⤊ 0⤋
Depending on when you sell him the house, you may still qualify to exclude any gain. The rule is you must have lived in the home for 2 of the last 5 years. If you sell by the same date in 2007 that you moved out in 2004, you should qualify. As another person said, if you don't sell for a gain, their is no tax. The IRS may question the sale price if you sell for less than 'market price' to a relative. I recommend talking to a tax professional for this issue.
2006-12-12 19:57:41 · answer #2 · answered by STEVEN F 7 · 0⤊ 0⤋
If he gets financed before you've been out of the house for three years, you'd be better off for tax purposes than if it takes longer. If you owned the house for two of the previous five years (not a problem to you) and lived in it as your primary residence for two of the last five years before the sale (you're running out of time for this) then the first $250K of gain ($500K if married filing joint) is exempt from capital gains tax.
If you have a very large gain, you might think about how you might help get your son financed for it if he's close, before it's three years since you moved out. If he's not able to get financed after three years, maybe an honest assessment of his chances for EVER getting financed for it would be in order.
Good luck.
2006-12-12 20:38:03 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
Who is claiming your old house in their income tax? You or your son? You will owe capitol gain tax if you sell it to your son...not until then.
2006-12-12 19:17:28 · answer #4 · answered by afghaniguy007 2 · 0⤊ 1⤋
Only if you sell it to him for a profit.
2006-12-12 19:17:54 · answer #5 · answered by Dutch 2 · 1⤊ 0⤋