We purchased our home in Ada County, Idaho November 2006 and lived in the home. My husband received orders and for the Army to move to Alabama for over a year. He left the end of February, 2007. I stayed in the home until the middle of June 2007. From the end of June 2007 to present we have been receiving rent for our home that is significantly less than the mortgage payment. If we decide to sell the home without using an agent, will we need to pay any taxes for the gains? We expect to receive approximately $20-25k more than we paid due to the extras we added.
Are there any exemptions from Capital Gains due to military move? What if we purchase another less expensive home, but put the gains into other debt?
Your responses are appreciated.
2007-08-21 13:56:11 · 6 answers · asked by Lacey R 1 in Business & Finance ➔ Taxes ➔ United States
Also, on what portion of the proceeds will we need to pay taxes?
The money remaining after paying off mortgage?
The new sale price minus the old sale price?
Can we deduct any expenses, such as improvements, from the gained amount?
2007-08-21 14:22:22 · update #1
There are special rules for excluding gain if a move is for a job move, which would include a military move. You don't get the full exclusion of $250,000 ($500,000 on a joint return), but have to prorate the allowable exclusion for the months you owned and lived in the house divided by 24. This should hopefully cover your gain. You might end up not having a gain anyways. To come up with the cost basis for the house, you would take the purchase of the house, add in the improvements, also add in the costs you incurred in buying the house (closing costs of the mortgage) and also add in the costs you incurred in selling the house (closing costs for the sale).
Buying another house doesn't work anymore. That used to be the rule, but the 2 out of 5 and 250,000 if single and 500,000 if married is the rule now.
2007-08-24 05:15:37 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Yes there are special rules for excluding gain if a move is for a job move, including of course a military move. You don't get the full exclusion of $250K, $500K on a joint return, but prorate the allowable exclusion for the months you owned and lived in the house divided by 24. This should more than cover your gain. But it might not be a gain anyway - you add the cost of improvements to the purchase price to get your basis, the amount you subtract from the sale price to calculate your gain.
Putting the money into another house would have to affect on your taxes - that rule went out many years ago.
2007-08-21 14:34:44 · answer #2 · answered by Judy 7 · 4⤊ 0⤋
You have a couple of things going for you. You would get a partial exclusion do to the job change and secondly I would think that you can make the gain go away due to the improvements. If you have been renting it you must take the depreciation which will reduce your basis. I have know some folks to miss that intentionally. Buying another house has no effect on this sale.
2007-08-21 16:27:02 · answer #3 · answered by ? 6 · 0⤊ 0⤋
individually, it is so complicated, that i could consult with a tax adviser, an accountant properly versed in assets tax regulation or an criminal expert additionally properly versed. you do no longer intend to make a decison per what you get right here.
2016-10-09 00:08:16 · answer #4 · answered by ? 4 · 0⤊ 0⤋
Judy is correct. There does appear to be a typo in her answer. Reinvesting would have NO tax effect.
2007-08-21 14:39:28 · answer #5 · answered by STEVEN F 7 · 2⤊ 0⤋
you have to be there 2 years. that is the rule. sorry I wish i had better news
2007-08-21 14:05:05 · answer #6 · answered by Domino 4 · 0⤊ 4⤋