Do I have to pay capital gain taxes if I sell my primary residence now?

Question

This is the first home my husband and I have owned, it's a condominium that was purchased 10 months ago. We just experienced a flood due to an improperly installed valve. We are selling the condo back to the builders (as it was brand new when purchased and this was VERY unforseen). We will be purchasing a new home and rolling all equity into it (there will be about $20,000 in equity with the buy-back due to current market value). Will we have to pay capital gains on the $20,000? Will this fall under "Unforseen Circumstances" and qualify for a lower exclusion? Or is there something else??? THANKS!

The $20k is above the original purchase price...

Answer 1

You say $20K in equity - is that really gain (is the builder paying you more than you originally paid) or is some or all of that due to your down payment? Equity amount doesn't matter, it's gain that would be taxable.

Rolling the equity into your new home has nothing to do with whether it's taxable. Under older rules it did, but that went out many years back.

I'd be surprised if the IRS considered your situation to qualify you for "unforseen circumstances" forcing you to sell, therefore getting the reduced exclusion, unless the property couldn't be repaired to be habitable again. If it can be fixed, but the builder is just buying it back because you are (justifiably) very unhappy with his work, that wouldn't likely count.

Good luck.

Answer 2

while you're married, you additionally could make $500,000 income and not have any tax criminal duty, ($250,000 in case you document unmarried). you do no longer could desire to purchase a alternative components or one that is greater costly. The regulation replaced some years in the past because of the fact lots of infant- boomers have been commencing up to downsize and getting hit with extensive tax expenses. condo residences are a diverse tale. you will could desire to pay cap features until you have chose to a sec 1030 replace. truly you have 40 5 days after the sale to "pick" your alternative components and 6 months to close. seek for suggestion from a tax expert for extra info and that may assist you in the time of the divorce.