if we bought a home for 500,000, sold it for 1,175000 do we owe capital gains? had a 200,000line of credit too

Question

If we owe capital gains how do we find out? When are they due? I forgot to add that we re purchased for 479,000.

Answer 1

If you owned and lived in the house which was your principal residence for two of the five years preceding the sale, you can exclude $500,000 of gain on the sale of the house.

Without any adjustments to the basis, your gain is $675,000. This leaves you with capital gains tax due on $175,000. This amounts to $26,250. These taxes are due when they are incurred, but you have to finish paying them when you file your taxes. If you have a large balance due, send in estimated taxes to reduce the penalty for underpayment of tax.

You should have a tax professional go over your numbers carefully to see how much of that gain can be reduced. Items to consider are expenses of selling the home, and any improvements on the home. If you re-did the kitchen at an expense of $50,000 for example, you have just reduced your taxable gain by that amount and saved $7,500 in taxes. If you paid 6% sales commission, which is $70,500, you reduced your gain by that amount and saved over $10K in taxes.

The line of credit and refinancing do not affect the capital gains on the sale of your home.

Answer 2

Probably so, unless you put a lot of money into improvements (not repairs - those don't count toward taxes).

Figure your basis - what you paid, plus cost of improvements, plus allowable expenses like real estate commissions, and subtract that from your selling price, to calculate your gain. If you're married filing a joint return you can exclude up to $500,000, otherwise subtract $250,000. Whatever is left is taxable. The tax is due when you file your return, but you might have to pay penalties for underwithholding if you don't file a quarterly estimated return and pay it then.

Repurchase would have no bearing on the taxability of the sale.

The above is for federal taxes. Your state might tax the sale also.