How does capital gains tax work on a home lived in less than 2 years?

Question

I Plan to sell a home before it has been lived in less than 2 years. Anticipated profit is $50K. How does capital gains tax apply to this?

Answer 1

If you have owned the house for a year or less, the gain will be taxed at your ordinary income rate. Do not forget state income taxes if you have any. If you have owned the property for more than a year then the capital gains rate of 15% applies.

What is the reason for your move? Is it because of a job related transfer, health reasons, or other unforseen circumstance, then you qualify for a pro-rata share of the exclusion. If you lived there for exactly one year then as a single person, you can exclude $125,000 of capital gains.

Answer 2

5% or 15%, unless your reason for selling was for a job change to a different area, medical purposes, or another exception, in which case some of the gain might be exempt.

5% if your marginal tax rate is 15% or less, including the amount of the gain - otherwise (and most likely) 15% or $7500.

Answer 3

Buy another home within eighteen months and you don't have to worry about it. You can then defer all capitol gains and do a onetime calculation after age 55. And right now the first 500k isn't taxed if you file a joint tax return.

Good luck.

Answer 4

"Judy" is correct. The rules "Perplexed" mentioned went away 10 years ago.