I'm a first time home owner and really need to move. I've owned the home for about a year, and am just learning about the capital gain tax. Trying to decide whether to try and stick it out one more year to avoid the tax. What are the percentages for short and long term capital gains, and which of the 2 will save me the most money? If I sell immediately the short term would apply, and if I wait a few months, the long term capital gain would apply.
2007-07-04 12:29:50 · 4 answers · asked by Jen1943 1 in Business & Finance ➔ Taxes ➔ United States
Short term is whatever your tax rate is. Long term is 5% or 15% again depending on your bracket if there were NOT special rates for ltcg - the ltcg gain rate is always lower than your bracket.
Depending on how far you are from hitting the year, you might want to go ahead and put it up for sale - if it's close you can probably hold of closing until you've held the property for a year and a day. The market most places isn't great right now anyway, so it might take awhile to sell.
And remember that the tax is only on the GAIN, not on the sale price. You probably don't have a lot of gain in less than a year, by the time you take out things like sales commission. And if you do, and it sells right away, and you can't put off closing until the year is up - well, hey, you still made out OK on it.
2007-07-04 13:29:15 · answer #1 · answered by Judy 7 · 1⤊ 0⤋
Why do you need to move? Did you lose your job, or are you moving to a new job? Are you divorcing? Do you have medical reasons for moving? There are lots of reasons that are going to allow you to exclude gain from the sale of your home, even though you have not lived there for two years. The list of reasons is included here, see page 14:
http://www.irs.gov/pub/irs-pdf/p523.pdf
If you satisfy one of the reasons, then you can pro-rate your gain. If you lived in the home for even six months, you can exclude $62,500 of gain.
If you cannot exclude gain, then whether you should hold onto the house for a year depends on your current tax bracket. If you are currently in the 15% bracket and will still be in the 15% bracket with the gain from the sale, it doesn't matter if you hold onto the home or not, since short-term capital gains tax is taxed the same as your other income.
If you are in a bracket higher than 15% then you should try to hold onto the home until one year plus one day before closing on the sale. Then the gain will be taxed at a maximum of 15%, which is the flat rate tax for long-term capital gains.
2007-07-04 22:24:17 · answer #2 · answered by ninasgramma 7 · 1⤊ 0⤋
If you live in your home and it is not rental property and you gain less than 250,000 dollars being single or 500,000 dollar being married it is not taxable if you sell you home. Dont worry about it and sell your home if you need to.
2007-07-05 12:33:57 · answer #3 · answered by swinger_girl_kelley 2 · 0⤊ 0⤋
If you're single and this has been your primary residence for at least 2 years, you have $250k of profit tax free....if you're married it's $500k. I believe less than that and your taxed at your normal income rate. call a tax- agency to be sure.
2007-07-04 19:38:09 · answer #4 · answered by Anonymous · 0⤊ 1⤋