if one of the two owners of a house has been there for two years what are the capital gains tax implications?

Question

My brother and I bought back in 1999 and are thinking of selling the house in a couple of years. Right now I'm the only one living in the house while my brother's permanent residence is somewhere else. What happens to the profit when we sell the house? Usually you have to have the house as your permanent residence for two years or else get taxed big time.

Answer 1

I believe you and your brother each treat your share of the house separately. You should be able to exclude your share of the gain if it was your principle residence for 2 of the last 5 years. Your brother will probably have to pay capital gains tax on his share. Net long term capital gains are taxed at a maximum rate of 28%.

Answer 2

As long as it was your primary residence in 2 of the last 5 years, you can exempt up to $250,000 of your gain. You each have your own tests, so if you've lived there for at least 2 years in the last 5, then you get the exemption while your brother doesn't. If you've both been there 2 out of 5 years, then you both get $250,000 exemption ($500,000) on the GAIN.

Otherwise, when you sell it'll be a long-term capital gain, which is taxed at 15% in 2006 (it might be extended again for 2007, though that depends on congress), otherwise it'll be taxed at a max of 28%.

Answer 3

If you have lived in a house for 2 of the last 5 years, you are entitled to 250,000 dollars tax-free gain. A married couple is entitled to twice that , according to the IRS