Does anyone know anything about Capital Gains taxes? I've heard so many different things!?

Question

My husband and I just sold our condo that we lived in for 13 months. We are just trying to figure out how much we need to set aside to pay Capital Gains taxes. I have heard SO many different theories on what the conditions are for paying Capital Gain taxes. Does anyone know the real answer? It was in Lehi, UT if that helps. Thank you!

Answer 1

The way it works, is that for your primary residence you have to live in it for 2 out of the prior 5 years. If you meet this requirement, you can exempt form capital gains taxes up to $250,000 if single, and $500,000 if married. There are some exceptions to the 2 out of 5 rule so that you could be able to prorate your gain. If you don't meet any of the exceptions than you might have taxable gain, as long as you sell your condo for more than you bought it for. Since you have owned it for more than 12 months any gains you have would be long-term which are taxed at a maximum rate of 15%. I have attached an article about sale of primary residence to see if you qualify for any of the exceptions.

Answer 2

You should really see a tax accountant but ..

The first question is how much did you make?
How much you made is your Net sales price less your "basis".

Your Net Sales price is the sale price less the realtors commission and costs of sale (e.g. what you paid as a seller, etc)

Your "basis" is the price you paid for the condo.
Include in your basis is some of the costs, repairs, upgrades, etc that you made during your occupancy

The difference is your net gain..

YOU ARE ONLY TAXED ON THE GAIN!

13 months is not long..and I am unsure if 12 months, 18, month or 24 months is the difference between LONG TERM capital gains or SHORT Term capital gains..

Short term capital gains are taxed at your normal income tax rate..

Long term capital gains are taxed at 15 or 18%...

PLUS there are federal tax breaks if you have lived in the house for 3 of the last 5 years. (apparently not from the facts) BUT if you reinvest the $$ and buy a house more expensive than your condo sold for .. you may be exempt from paying capital gains taxes..

Also,, I am not sure but if you sold it because of a divorce.. the gains may also be exempt ... (that is a tricky questions)

Any accountant should be able to help you figure out if one of these capital gains exemptions are applicable..

Answer 3

If you lived there for 13 months, the gain would be long-term. Unless you moved for health or job reasons, you will have to pay tax on any gain if you had one. You calculate that as the selling price minus what you bought it for originally, then subtract selling costs like real estate commissions. If you did any remodeling, you can subtract that also when calculating your gain.

You will pay tax of either 5% or 15% of your gain, depending on your tax rate - if your bracket for the year, including the gain on the condo, is over 15%, you'll pay 15% tax; otherwise you'll pay 5%. Remember though, that's on the GAIN, not the selling price.

Answer 4

The laws are complicated (most income tax law is obscenely complicated) and you haven't given critical facts. It's critical to know why you moved, how far you moved, what you paid for the condo and what you sold it for. Also the cost of additions or major improvements, if any. Worst case I know of would be 15% of your net profit on the sale.

Answer 5

I found this information..Please use it as a guideline only. You will likely need speak with a professional advisor. From my uderstanding of the information listed below, a married couple can make 500,000 capital gains before having to pay capital gains tax, BUT had to have owned for 2 years. Since you owned for 13 months, you would PRORATE the 500,000 based on the percentage of 13 months out of 2 years (24 months) 13 months out of 24 months is 54%

500, 000*54%=$270,000. So if you didn't make more than $270,000 you are in the clear, Unless you have already claimed your exemption within the last 2 years, on the sale of another property.

read below for more information:

"The Taxpayer Relief act of 1997 drastically changed the tax laws concerning capital gains on personal residences. Previously, taxpayers who sold their primary residence could defer tax on their gain if they bought another home within 2 years of selling. But the price of the new home had to be at least equal to the price of the home that was sold.

Under the new law, you don't have to buy another home to receive capital gains tax relief. And you only pay tax on gain you realize over $250,000, for a single individual and $500,000, for a married couple.

For example, let's say that you and your wife bought your current home for $300,000 in January, 1997. You sold it for $450,000 in March, 1999. Your $150,000 gain is significantly less than $500,000, so you won't be taxed on the gain.

To qualify for this gain exclusion, the seller must have occupied the property for two of the five years before the sale. There is no limit on how many times you can take the exclusion, but is can only be taken once every two years.

Suppose your employer transfers you to a different state a year and one-half after you buy your home. Will you be disqualified from taking the capital gain exclusion because of your relatively short period of ownership?

Seller Tip: The 1997 tax law didn't clearly spell out how much capital gains tax homeowners owed if they sold before the required two years. A law passed last year clarified the issue. To calculate how much tax you'd owe on your gain, multiply the exclusion amount you'd be entitled to if you owned for two years ($250,000 for singles or $500,000, if married and filing jointly) by your residency period expressed as a fraction of two years.

Let's say you bought a home in San Francisco for $350,000 on June 30, 1997. Your employer transfers you to New York City 18 months later, so you sell your home. You close on the sale on December 30, 1998 and realize a profit of $150,000. You're single so you'd be entitled to a capital gain exclusion of $250,000 if you had resided at the property for two years. You've resided at the property for 3/4 or 75 percent of the statutory time period. To arrive at this fraction, divide 18 months by 24 months (or 1.5 years by 2 years). Seventy-five percent of $250,000 is $187,500. So you will have no capital gain liability on this sale because your $150,000 profit is less than $187,500.

The new tax law is expected to help most home sellers. However, homeowners that have benefited from decades of home price appreciation might have done better under the old tax law. For example, suppose you bought your current home for $100,000 twenty-five years ago. It's worth $750,000 today. If you're single, you'll owe capital gains tax on $400,000 ($650,000 of gain less the $250,000 exclusion). Under the old law you could have deferred the entire gain if you bought another home within 2 years for $750,000 or more.

The new tax law reduced the maximum capital gains rate from 28 to 20 percent. If you acquire a primary residence after December 31, 2000 and hold it for a minimum of five years before selling, the top capital gains rate will be 18 percent.

The Closing: Lower capital gains rates apply to taxpayers in the 15 percent tax bracket."