I have a question about capital gains and refinancing?

Question

I purchased my condo originally for 60,000 It is now worth 80,000 I am going to refinance it. I am going to take out 10,000. Does this meen, If I were to sell it before living in it two years. I would only be taxed capital gains on the remaining 10,000 I will be earning at closing?

Answer 1

Well - it depends on why you are selling the home. If this was your primary residence and you did not meet the ownership and USE tests, but you needed to sell your home for a health issue, a change in employment, or an "unforseen circumstance". If you sell your house and move @ least 50 miles away "for work" that is considered an employment move.

There is DEFINITELY a way around this. For the most specific details, look at pub 523 from the IRS - I believe that is the cap. gains on real estate pub. It will describe to you IN DETAIL what exactly you need, or how you need to make this situation work for you. YOUR SITUATION WOULD BE A REDUCED MAXIMUM EXCLUSION situation, which reduces your liability up to 250k.

If you have more questions, just ask! :)

Answer 2

By reading your question, it sounds like you're worried about paying capital gains taxes on the sale of your property.

You're only going to pay capital gains taxes on the sale of your investment property if you do not hold ownership for at least two years, but probably not on your primary residence. Most people can sell their primary residence and take a gain on sale up to $250,000 without any capital gains if they do not have any other large tax obligations.

Also keep in mind that capital gains tax rate is based upon your income level AND the price you bought your property for versus the price you sold it at, not the appraised value or any loans you may have.

Answer 3

Taking out money in this way does not create "income" for income tax purposes because you have to pay it back.