Plan on listing house for $650,000. We owe $220.000. Had hoped to have a nice nest egg at the end but am worried tax liability will eat up any proceeds. Any idea how big a hit this will be to our plans. We have hopes of buying a modest home in Boise area and invest the rest but have concerns of CA income tax as well as IRS.
2007-02-19 00:37:31 · 4 answers · asked by curious george 1 in Business & Finance ➔ Taxes ➔ United States
We paid $200,000 for house.
2007-02-19 00:49:52 · update #1
If you bought the home for $200,000 and sell it for $650,000, then your gain is less than $500,000. You will be able to exclude all of this gain from federal income tax as long as you have owned and lived in the house for two of the last five years, and you did not use the home for business.
The taxable gain for Federal tax and California tax are generally the same.
2007-02-19 01:47:10 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
Since you say "we" I'll assume that you are a married couple filing a joint return. If you lived in the house for 2 of the 5 years immediately prior to the date of sale, you can exclude up to $500,000 from taxes. If you don't meet the 2 of 5 rule yet, stay put until you do. Your gain will be around $450,000 or so, so no Federal tax will be due. Many states give the same sprout and if CA does there won't be any tax liability there either. Check the FTB website to see how CA treats it.
The outstanding loan balance isn't a factor.
2007-02-19 00:55:49 · answer #2 · answered by Bostonian In MO 7 · 1⤊ 0⤋
It depends on what you paid for the house to begin with. You will pay capital gains on anything over $250,000 for a single, $500,000 for a married couple. It has to have been your principal place of residence for 2 of the last 5 years also.
If you paid $200,000 for the house, your capital gains would be $450,000. I'm assuming from you are married so you can make $500,000 in capital gains without having a tax liability.
The amount you still owe on it has nothing to do with capital gains but I am wondering how you owe $220,000 if you only paid $200,000. I assume you have refinanced somewhere along the line and have already taken equity out of the house??
2007-02-19 00:42:08 · answer #3 · answered by Faye H 6 · 1⤊ 1⤋
If you've lived in the house for two of the five years immediately before the sale, and have owned it for two of those same five years, you can exclude $500,000 gain from the sale on a joint return. So assuming that your basis is at lease $150K, if you sell for $650K you wouldn't have to pay any tax to the feds. I'm not sure of CA rules though - you might or might not owe something there.
2007-02-19 16:09:32 · answer #4 · answered by Judy 7 · 0⤊ 0⤋