Hi. I inherited a house recently. Its been about nine months since the house transferred to me. From my understanding. in order to not have to pay capital gains tax ( prop value is way under the limits) if you stay in house for two years. I have stayed in this house almost my entire life the last 5 of which caring for my relatives. I want to sell this house and move on, and not stay another year and 3 months because of all the shooting and bad stuff going on in the neighborhoods. Is there an exclusion of having to pay this tax for cases like mine? Where can I find this out? ( Whether I have to pay it or not, since I have already been staying here., don't feel that I should have to stay here any longer, now that my responsibilities as caregiver are over. Thank you so much!
2007-12-17 11:04:17 · 4 answers · asked by Alana 2 in Business & Finance ➔ Taxes ➔ United States
You can sell the house anytime.
Capital gains up to $250,000 (or $500,000 if married and filing jointly) are federal income tax free provided you've lived in the house for at least two of the previous five years. If you've lived there a while and the capital gain is significant, that alone would be a good motive to hang in there another fifteen months.
The capital gain would be the difference between what you paid for the property, plus any capital improvements you made on the property (your cost basis) and the selling price of the home.
Because you inherited the property, your cost basis is the value of the property on the date the original owner died (provided the house was not in an irrevocable trust). Since real estate prices have been doing nothing but falling lately, by selling now you might be able to capture an actual capital loss, which can be used dollar-for-dollar to offset any other capital gains on your tax return, or offset ordinary income up to $3,000.
First thing tomorrow, make three phone calls. The first to a tax attorney, the second to a real estate agent and the third to a moving company.
2007-12-17 11:21:48 · answer #1 · answered by Tim 3 · 0⤊ 1⤋
What was the value of the house on the date of death?
How much has the value increased since he died?
Did you receive this house as a relative or did you receive as payment for the caregiving.
If you received it as a relative, your capital gains are not the value of the house, but the gain since you inherited it. Any gain would be taxed at 5 or 15%, not as much as your ordinary income tax rate (inherited property is always long term capital gain) .
If you received the house in payment for care giving, you have an income tax issue and should see a tax professional.
2007-12-17 11:16:12 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Any capital gains tax would be based upon any increase in value since the bequestor's date of death. With the current market, it's quite possible that it has actually dropped a bit in value in the 9 months since. That means that there would be no tax at all.
Unfortunately to qualify for the exclusion of tax you must own and live in it for 2 of the 5 years immediately prior to the sale to qualify. Howerver with current market conditions you may actually have a loss so that's a moot point.
2007-12-17 11:46:15 · answer #3 · answered by Bostonian In MO 7 · 0⤊ 0⤋
The five years you lived there does not, unfortunately, count toward the length of time you owned the home. The capital gains treatment is based upon the length of time that you were an owner and again, unfortunately, there are no exceptions for condition of the neighborhood
2007-12-17 11:08:10 · answer #4 · answered by jwishz 7 · 0⤊ 0⤋