Capital gains tax info

Lurch830

Lurch830

messin' with sasquatch
Joined
Mar 1, 2007
Location
Wilton & Albemarle, NC
I don't know anybody that can answer this and I wouldn't be the least bit surprised if someone on here knows the answer:
Found a house that I'm interested in & the way the market is I need to move fast, but don't want to sell my current house until I'm moved in since I'm not a fan of the whole apartment/storage space idea and there is nothing like opendoor in my area.
If I buy house#2 which is more expensive than house#1, how long do I have to sell house#1 before I have to pay capital gains tax? I read somewhere its 1 year, but that seemed more for home flipping & you can't believe everything on the interwebz (yes...I know the irony of that statement).

TIA,
Brandon
 
Meant to post in Chit Chat....dangit!
 
How long have you been in your current house and is it your primary residence?

If more than 2 years you basically have 5 years to sell as .ong as you handle paperwork right. If you've been in current less than 2 years, then you need a good cpa but still do able
 
You're thinking of a 1031 exchange I feel like. If it's your primary residence the rules are different, if you've been there 2 yrs there are no gains taxes.

That being said, if you spent the time to think about this and make this post, that house already has 3 offers on it.
 
Ron said:
How long have you been in your current house and is it your primary residence?

If more than 2 years you basically have 5 years to sell as .ong as you handle paperwork right. If you've been in current less than 2 years, then you need a good cpa but still do able
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Yep...just realized I didn't add that part! House#1 is my primary residence & I've owned it for just over 2 years...sounds like I'm in the clear!

braxton357 said:
You're thinking of a 1031 exchange I feel like. If it's your primary residence the rules are different, if you've been there 2 yrs there are no gains taxes.

That being said, if you spent the time to think about this and make this post, that house already has 3 offers on it.
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You're probably not wrong! The only thing that may save me are the photos not being great or recent...waiting on a call back from the realtor for a virtual walk through.
 
orange150 said:
Over two years in your primary and you won’t owe any capital gains. I just went through this.
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braxton357 said:
If it's your primary residence the rules are different, if you've been there 2 yrs there are no gains taxes.
Click to expand...

Just for the sake of completeness or if others find this in the future.
There is a slight caveat here which is why I said you have 5 years.

Just because you lived here for 2 years doesnt make it your primary residence forever and ever. If you buy a new house move in it, then rent this place out or even just leave it sitting and then sell. That could change the equation.

But if you buy, move your stuff, do some minor repairs then list and profit...you are clear.

There is even a real interesting loop hole. The home has to be a PR for 2 of last 5 years. If you can do math you understand that 2+2 is < 5. So....you can basically in the eyes of the IRS have 2 primary residences at all times. But you can only use the exemption 1 time every two years. But everyone who can should have two primary residences.
 
Ron said:
Just for the sake of completeness or if others find this in the future.
There is a slight caveat here which is why I said you have 5 years.

Just because you lived here for 2 years doesnt make it your primary residence forever and ever. If you buy a new house move in it, then rent this place out or even just leave it sitting and then sell. That could change the equation.

But if you buy, move your stuff, do some minor repairs then list and profit...you are clear.

There is even a real interesting loop hole. The home has to be a PR for 2 of last 5 years. If you can do math you understand that 2+2 is < 5. So....you can basically in the eyes of the IRS have 2 primary residences at all times. But you can only use the exemption 1 time every two years. But everyone who can should have two primary residences.
Click to expand...

I know you are not a lawyer or CPA, so this is all hypothetical...
Is there a simple way to prove/disprove that a house is a PR, if you have multiples? Obviously getting rental income from one would disprove it.
 
paradisePWoffrd said:
I know you are not a lawyer or CPA, so this is all hypothetical...
Is there a simple way to prove/disprove that a house is a PR, if you have multiples? Obviously getting rental income from one would disprove it.
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From my view point...
It isnt an issue until/unless you get audited.

Things like utility bills in your name can be proof, I think.

Rental income could disprove it I guess, but if you didnt claim rental income then how would they know to look, in theory?


Also...there is no rule that it must be continuous. So a rental house that you owned for 5 years but wasnt rented for any 24 months counts.
Or there are qualifying events. Past military gets you a 10 year exemption. Change of jobs gets you an exemption. etc.
 
Ron said:
But if you buy, move your stuff, do some minor repairs then list and profit...you are clear.
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That's the plan!

Virtual tour is set-up for Friday morning. Apparently its being sold due to divorce and they are being weird with showings/tours...didn't sound like there were any offers on it yet.
 
Lurch830 said:
That's the plan!

Virtual tour is set-up for Friday morning. Apparently its being sold due to divorce and they are being weird with showings/tours...didn't sound like there were any offers on it yet.
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Feel out the situation and cut em at the knees. When I bought it was the same situation and they just wanted the house GONE. I made a real low ball offer and was signing papers as soon as I could get an appointment. YMMV.
 
Ron said:
From my view point...
It isnt an issue until/unless you get audited.

Things like utility bills in your name can be proof, I think.

Rental income could disprove it I guess, but if you didnt claim rental income then how would they know to look, in theory?


Also...there is no rule that it must be continuous. So a rental house that you owned for 5 years but wasnt rented for any 24 months counts.
Or there are qualifying events. Past military gets you a 10 year exemption. Change of jobs gets you an exemption. etc.
Click to expand...

This is what i had thought, as well.

Had a friend sell a long time rental a yr or 2 ago. We discussed taxes and he mentioned that there was a 1 time exemption or something, from his CPA. Not sure if that is a thing, or if it was and the tax laws have changed?
 
skyhighZJ said:
Feel out the situation and cut em at the knees. When I bought it was the same situation and they just wanted the house GONE. I made a real low ball offer and was signing papers as soon as I could get an appointment. YMMV.
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I won't hold my breath, but that would be nice! I actually bought half of my tools off Craigslist from a divorcee...wouldn't mind adding a house & land to my divorce collection!

Turns out I'll be 10-15 minutes away tomorrow for work so I'm fully expecting to make a 'wrong' turn. And digging a little deeper, it was first listed on 4/24/2020, removed 10/30/2020 & relisted on 3/1/2020 for a little less.
 
Realtor showed up for the virtual tour and the guy said he'd never agreed to a tour that day. So its back to the drawing board for me, but the realtor is going to try again (no skin off my teeth).
Apparently the divorce isn't going too well...dude has already moved his new girl in and is trying to trash the place with vehicles parked all over the yard & 30-40 trash bags on the porch the realtor had to step over just to knock on the door. My guess he's trying to drop the property value to buy off the ex or just sabotage the sale.
 
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