If you sell your second or vacation home do you pay the same on capital gain, as if selling primary home?

Answer 1

Have you used it as your main residence during the last five years? If you can bring any period of main residence up to two years out of the last five, you will enjoy the main residence exemption. Of course, you could not sell your current main home for two years after the sale of the vacation home.

You will pay the same CGT rates as most other types of property, unless you rented it out at any point. In that case, any depreciation taken will be recaptured (clawed back) and taxed at normal income tax rates.

What are you going to do with the money? If it is to invest in real estate, consider a section 1031 exchange. For that, I strongly recommend engaging a CPA or Enrolled Agent, as well as a professional firm to handle the exchange. What this does is defer tax until you sell the succeeding asset (note, it only defers - the transaction will get taxed one way or another unless you die holding it). having said all that, please do not do a 1031 exchange only for tax reasons. You must always have a better reason for doing it.

Answer 2

Oh, your father got a tax-free gain, but you did not. At least, figure your profit after you pay the taxes, and dad should get only 1/2 of that. You have to pay capital gains tax on the profit. Get a tax preparer to figure the gain so you pay as little as possible. Using the proceeds to improve your primary home will not reduce your taxes.

Answer 3

The $250K/$500K exemption for gain on sale of a primary home that you've owned and lived in for at least two of the five years immediately prior to sale does not apply to a second home/vacation home, so you pay capital gains tax on whatever your gain is.

Answer 4

You will pay capital gains tax. If the home was owned for more than a year, the most tax that would be paid is 15% of the gain.