I am considering selling my house, it's my first house and I am curious about penalties?

Question

I've heard that the money I make off of the house could be penalized via capitol gains? Or that I might have to "do" something with the profit such as use it toward another home? I want to use the money to pay for schooling and to live off of while attending school, is that possible?

Answer 1

It is different in each state. In CA, there are a few determining factors with regards to capitol gains:
For the home to be considered your primary residence, you have to have lived in it for at 2 out of the last 5 years. If this is the case, then as a single person, you are exempt from capitol gains of up to $250,000 of profit and $500,000 for a married couple. If you have not lived in the house for at least two years, then you must transfer the funds to another property via a 1031 exchange in order to avoid paying taxes and finish out the 2 years in the new home. If you have lived in the home for at least 1 year, but less than 2 years, you will only have to pay short term capitol gains, which is half of the tax penalty.
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Answer 2

Depending on how long you own the home and which state you live in. But to pay capital gain you have to make a gain. You can deduct from this gain all cost of sale, when you bought the home and when you sell the home, you can also deduct remodelling and other costs. In a Marke tlike that your real gain might not be that high after deduction of all costs. You can talk to a tax accountant as well, he/she can advise you better specific for the area you live in.

Answer 3

first get a realtor to tell you what you could sell the house for, second to avoid capital gains these are the rules: single person sells house under $250,000, must have lived in it for 2 years minimum will not pay capital gains. Married couples can sell up to $500,000 & not pay as long as they've lived there 2 years. Unless these amounts changed in the last year, this is the rule. (consult an accountant for more info)

Answer 4

You'll have to pay capital gains tax after reading your further statements. However, they are less than regular taxes. You will still have profits to do what you want to do.