I am getting ready to sell a house in Lousiana. I moved to Kansas a couple of years ago for a job, and bought a house here last year with no money down (it was all tied up in the other house). I am concerned that I will show a decent profit on the old house, bought it for $67,000 in 1998 and expect it should sell for at least $120,000 on the current market. I need to move as much money as I can into my current house to hopefully pay off the second mortgage on it at least, but I'm expecting that with high Kansas taxes and US taxes that I will take a pretty big hit. Anybody been through this before, and have any advise?
2007-05-01 01:51:47 · 4 answers · asked by p_doell 5 in Business & Finance ➔ Taxes ➔ United States
If you lived in it for at least two of the previous five years right before the sale, you're probably in luck and can exclude the gain from federal taxes - I don't know what KS does with house sales, their rules might or might not be different, so I don't know if you'd owe any state taxes on the sale.
The rules on excluding the gain say you have to have lived in it as your main home for two of the five years immediately prior to the sale - that's 2 x 365 days of that time. It doesn't have to be the two years just before the sale, any two within that five years works, so if you moved two years ago, you'd still be in good shape to have time to sell it and get the exclusion. You'd be able to exclude up to $250,000 of gain ($500K on a joint return) so it sounds like that should cover you.
Then there's the matter of what you did with it in the meantime. If you rented it out and took depreciation, you'd have to pay some taxes, on the depreciation amount. If it just sat there empty, you wouldn't.
The rule about deferring gain if you invest the money in another home that one responder mentioned has been gone for quite awhile - not in effect any more.
2007-05-01 02:35:05 · answer #1 · answered by Judy 7 · 1⤊ 2⤋
If you lived in it as your principal residence for 2 of the 5 years immediately prior to the sale, you can exclude all or part of the gain on sale from taxes. You can exclude up to $250k in gain if your filing status is Single or up to $500k in gain if your filing status is Married Filing Jointly.
If you don't qualify for the exclusion you will pay tax on the gain at the lower long term capital gains tax rate, normally 15% for most taxpayers.
If you qualify for the exclusion but rented the home out once you moved out, you will have to pay tax on an amount equal to the depreciation allowed or allowable while you were renting the property out.
2007-05-01 09:20:26 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 2⤋
If you have lived in it for 2 out of the past 5 years, it is considered your primary residence, and you can exclude capital gains of up to $250,000 on the sale if single, and $500,000 if married.
2007-05-01 08:57:47 · answer #3 · answered by Anonymous · 2⤊ 0⤋
if it is your only residence, you shouldnt have anythnig to worry about. If you do make too much on it you have 24 months to defer profit by investing it into another main residence ( i believe) got to the IRS website
2007-05-01 08:55:56 · answer #4 · answered by Anonymous · 1⤊ 5⤋