My primary residence is in Fl, and my wife and I have lived in it for over 2 years. I plan to refinance later this year and cash-out about 100k in order to remodel my home. Will I be responsible for capital gains on the cash-out?
2007-04-17 06:20:36 · 8 answers · asked by P_Money 2 in Business & Finance ➔ Taxes ➔ United States
No. Equity removed from a home in a cashout transaction is never taxed.
However, if when you go to sell the home, if you are then subject to capital gains, hopefully you haven't already spent it. But that's unlikely to be an issue, as the first $500,000 in gains is tax-free for a married couple who have lived in the home as their primary residence for at least 2 of the prior 5 years.
And considering that most of that money will actually go to capital improvements to the home, you'll be increasing the cost basis of the home, limiting the actual gain when you do sell. Just be sure to keep your records of the improvements until you sell! I don't know what counts as a capital improvement and what doesn't, but when the time comes, a CPA will be able to answer those questions for you.
2007-04-17 06:29:37 · answer #1 · answered by Yanswersmonitorsarenazis 5 · 2⤊ 0⤋
When you say cash out, you are actually using a misnomer. You are just refinancing your house. For that reason you are not recieving capital gains, just taking out a loan.
You cannot be taxed on a loan. Until you actually sell the house, the value of the home is in question because the market will determine the actual value at sale time. Because of this fact, you cannot have capital gains as long as you own the property.
2007-04-17 06:31:54 · answer #2 · answered by NoLifeSigns 4 · 0⤊ 0⤋
as long as you meet all the factors, and curiously you do, then you definately do no longer might desire to pay capital effective properties tax on something below the 5 hundred,000 for a MFJ couple. even nevertheless- the exclusion can purely be used as quickly as each and every 2 years. So in case you want to sell the two residences, be sure you sell the only you're approximately to lease out first (so as which you nonetheless qualify below the two out of previous 5 years rule). Then, you will might desire to await 2 years and then sell the 2nd. And Bostonian is right with regard to the condominium proration (which contain depreciation). you will no longer get the completed exclusion, yet you will get some (that's better than no longer something). good good fortune to you. :0)
2016-12-29 04:36:06 · answer #3 · answered by ? 3 · 0⤊ 0⤋
No.
A refinance does not create a capital gain. Period.
The cash you collect at close merely is a "return of capital" or a return of cash previously invested in the mortgage, and is not includible as income.
Make sure you keep the closing statement on the refinance - and give it to your tax preparer next year. There will be several items to deduct on your next tax return.
2007-04-17 08:04:42 · answer #4 · answered by bold4bs 4 · 0⤊ 1⤋
No, there are no tax consequences for an equity cash-out. It's only a loan that needs to be repaid and loan proceeds are never taxable.
2007-04-17 06:26:23 · answer #5 · answered by Bostonian In MO 7 · 2⤊ 0⤋
No, proceeds from a loan aren't taxable.
2007-04-17 06:37:14 · answer #6 · answered by Judy 7 · 1⤊ 0⤋
No, you will not
2007-04-17 06:23:13 · answer #7 · answered by Anonymous · 1⤊ 0⤋
no
2007-04-17 06:25:52 · answer #8 · answered by Jo Blo 6 · 0⤊ 0⤋