Tax Advice for Selling my house?

Question

My dad and mom bought our house for $275,000 in 1980. They will pass this house down to me, what if I sell it when they pass away for $700,000. I'm single and don't plan to get married so would I pay huge taxes seeing how I would get a $250,000 tax shelter rather than a $500,000 shelter?..........also what if my dad passes away and my mom sells it will she get the $250,000 or $500,000 tax shelter?

Answer 1

Bostonian is correct. When your parents pass away, your basis in the house will be the fair market value of the house on the day of their death. So, if the house is worth $700,000 on the day of their death and you sell it for $715,000, then your taxable gain will be $15,000 and you will be liable for long-term capital gains on that $15,000 which will be approximately $2,250. The other $712,750 would be yours to do with as you wish. Do yourself a favor though, put a large portion of it in some broad based mutual funds for retirement. See a good, licensed financial advisor to best take advantage of this. If you live in the house for two years after their death, then the $250,000 exclusion would also apply. In that situation, even if you sold the house for $950,000, you would not have a tax liability.

Good luck,

PS: The $250,000 amount you are talking about is not a tax shelter, it is a tax exclusion. Specifically, it is called a section 121 exclusion.

Answer 2

You get the stepped up basis if you receive the home through bequest. If that basis is $700k and you sell for that amount there is no gain and no tax. If you sell for more than that you may have a tax liability. To avoid the tax you will have to move into the home as your principal residence for at least 2 years before you sell. If you don't live in the home then any gain is fully taxable as a long-term capital gain regardless of how long you own it. The rate is 15% for most taxpayers. If your marginal tax rate is 15% or less, the rate is 5%.

If your father were to pre-decease your mother, she'd receive a blended basis of one-half of the stepped up basis from your father ($350,000) plus one half of her own original basis ($137,500) for an adjusted basis of $487,500. If she were to sell for $700,000, her gain would be $212,500 and no tax would be due.

Answer 3

If the residing house exchange into your significant place of residing for a minimum of two of the final 5 years, then- A unmarried individual qualifies for a $250,000 income exclusion; a married couple qualify for a $500,000 income exclusion. You indicated which you have a income of $425,000. in case you're a married couple, you will no longer ought to pay any tax on the income. in case you're unmarried, you will ought to pay tax on an element of the income. the truly income could be below you indicated. The adjusted fee of your place is the acquisition cost plus any capital advancements which you made to the residing house. Your advertising cost is the quantity you get after advertising costs (no longer the agreed to advertising cost) or maybe this is often decreased by specific different advertising costs. in case you're unmarried, i've got self assurance you will ought to pay taxes on a income of $one hundred thirty,000 or greater (watching the climate i discussed in the previous).

Answer 4

Your basis in the house, if you inherit it, won't be what your parents originally paid for it, it will be it's value on the date of the second of their deaths. So your gain might not be nearly as much as you're afraid it will, and you might not owe anything if you meet the 2 year rule for excluding gain.

Answer 5

How are you thinking that you'll get a tax shelter?

You will get a capital gain. You're mom's basis in the house is 275K and if she sells for 700K, that's $425K capital gain. Unless you do a 1031 conversion and put the money into a new like kind property (residential property).