When does the Capitol Gains Tax Kickin?

Ventucky Red

Ventucky Red

Pattern Altitude
Joined
Jan 9, 2013
Messages
2,261
Display Name
Display name:
Jon
Question

If you sell one home for lets say $1.325 Million that you paid $450,000 giving you a net of $775,000 after commissions and closing and buy another home outright for $725,000. Is the $250,000.00 (assuming a married couple takes the $500,000 one time deduction) subject to a Capitol Gains Tax.... Or because this is being rolled into another property only $50K would be subject to the Capitol Gains Tax should the not want to exercise this deduction at this time?
 
Capitol gains. Sounds like the life story of our governor (lower case intentional) jerry brown, expanding the State of California into a bigger than ever bureaucratic complex.
 
Last edited:
But but you capitalized the J and B in his name...:eek:
 
The one time avoidance of capitol gains was intended to benefit retirees downsizing in that they could sell their home and not be subject to tax on a large portion of the gain, and thereby have some money to spend in retirement. Then a couple by the name of starker sued the IRS for the ability to defer capitol gain on the sale of income property if a like kind was purchased. The Starkers won and the 1031 exchange was born. As a corollary of that the one time exclusion on the gain on sale of a personal residence was changed to one time every 2 years. So, I would claim the exclusion on 500k if married and filing jointly. If it were business property, I would seek to do a 1031 exchange and defer the tax but the rules are strict in that regard.
 
Ventucky Red said:
Question

If you sell one home for lets say $1.325 Million that you paid $450,000 giving you a net of $775,000 after commissions and closing and buy another home outright for $725,000. Is the $250,000.00 (assuming a married couple takes the $500,000 one time deduction) subject to a Capitol Gains Tax.... Or because this is being rolled into another property only $50K would be subject to the Capitol Gains Tax should the not want to exercise this deduction at this time?
Click to expand...
Was it your primary residence? Did you live, not pretend to live, in it for 2 of the previous 5 years? If so there should be no gain to pay. Ooops, I speak with forked tongue. You can shelter $500,000 of gain. Ah hell, you said that in your post. Pullin ripcord, I'm outta here.
 
luvflyin said:
Was it your primary residence? Did you live, not pretend to live, in it for 2 of the previous 5 years? If so there should be no gain to pay. Ooops, I speak with forked tongue. You can shelter $500,000 of gain. Ah hell, you said that in your post. Pullin ripcord, I'm outta here.
Click to expand...

mpj040179500001.jpg
 
Seems that moving house regularly (well, not super regularly, but before your gains reach $500k) is a more tax effective strategy than staying in one house for a long, long time. Assuming all else is equal.
 
If you've lived in the house for 2 of the past 5 years then you can claim it as a primary residence. Because of that, you do not have to report the first $250,000 of profit from the sale. If you are married then it becomes $500,000. There are pro-rated amounts if you rented the property. No, I don't know what happens if you also lived 2 of 5 years in another house. See your tax advisor.

What you paid for the house is only part of your basis. If you keep all your home improvement receipts then they add to the total too.
 
SkyDog58 said:
Yes and tax collection works far more efficiently than does tax spending.
Click to expand...

If that were the case they wouldn't be running a massive deficit.

Or did you mean the other way around?

I've never seen them have even the slightest problem spending more than they take in.
 
denverpilot said:
If that were the case they wouldn't be running a massive deficit.

Or did you mean the other way around?

I've never seen them have even the slightest problem spending more than they take in.
Click to expand...

Oh, I meant that they are real good at taking our money but not at spending it in an efficient or wise manner. Spending massive amounts foolishly is not necessarily efficient. But I do see how it can be viewed that way.
 
SkyDog58 said:
Oh, I meant that they are real good at taking our money but not at spending it in an efficient or wise manner. Spending massive amounts foolishly is not necessarily efficient. But I do see how it can be viewed that way.
Click to expand...

Scarcity tends to get people to think about efficiency. You don't care if something is expensive if you're always reaching in someone else's pocket to pay for it and alway able to get more loans against the deep pocketed person.

Debt ceiling raised again a couple weeks ago, like it always is. Hasn't been a real fiscal conservative in DC or any other area of politics in my lifetime. Just a bunch of folks who give lip-service to it. Flapping their gums in between steak dinners on everyone else's dimes.
 
Katamarino said:
Seems that moving house regularly (well, not super regularly, but before your gains reach $500k) is a more tax effective strategy than staying in one house for a long, long time. Assuming all else is equal.
Click to expand...
yes, except your transactions costs are >10% of the total (not of the gain), so it has to go up A LOT before you actually save money this way
 
Katamarino said:
Seems that moving house regularly (well, not super regularly, but before your gains reach $500k) is a more tax effective strategy than staying in one house for a long, long time. Assuming all else is equal.
Click to expand...
MIFlyer said:
yes, except your transactions costs are >10% of the total (not of the gain), so it has to go up A LOT before you actually save money this way
Click to expand...
And, as long as you are not mortgaging.
 
bflynn said:
If you've lived in the house for 2 of the past 5 years then you can claim it as a primary residence. Because of that, you do not have to report the first $250,000 of profit from the sale. If you are married then it becomes $500,000. There are pro-rated amounts if you rented the property. No, I don't know what happens if you also lived 2 of 5 years in another house. See your tax advisor.

What you paid for the house is only part of your basis. If you keep all your home improvement receipts then they add to the total too.
Click to expand...
?????.....there are pro-rated amounts if you rented the property.....I'm may be in that situation. A year ago moved back into a house that has been rented for about 8 years. Plan is to occupy for 2 years and then make the decision to sell or stay. I was under the impression that meeting the 2 year requirement was just that, 2 years, no gain. What exactly is "pro-rated?" The exclusion amount? Or is it also you will have to pay some gain, even if you're under the exclusion amount? If so is it pretty much "straight line." I'll certainly see my tax advisor when the time comes, but for now some background and ideas would be nice.
 
Yea.... maybe I should learn how to spell... PA Flyer... I like your example, but I got it the first time... And yes, I have recommend they talk to an accountant or someone the knows better than me.

Her is the scoop.... SIL and husband bought a house that was in a dumpy area of Seattle... SIL finds out that the house is in part of an Urban Revitalization Zone (read... they need more homes for the Amazon employees) and that their oversized (reason they bought it) lot can be zoned for development up to five units..

The list it, they sell it to a developer, they buy a brand new house cash... smart move... and now the husband wants to go out and buy a bunch toys thinking there will be no liability...

It is hard to explain this to people that think Bernie Sanders was too conservative.

Carry on!
 
Ventucky Red said:
It is hard to explain this to people that think Bernie Sanders was too conservative.
Click to expand...

I LOLed at that one. BTDT, had similar conversations with certain family members.

Sometimes putting it in terms they understand helps: "How else would he have paid for his Dacha at the beach, Tovarisch?"

ROFLMAO.

Of course those same family members were raised by someone who failed a business for many many years of back taxes many moons ago, so they do have a "Primacy" problem in their life skills training and background. :)
 
I always thought it was cute that you need a license to lobby in most places. I guess the politicians like to know who they can call to buy lunch.
 
denverpilot said:
Of course those same family members were raised by someone who failed a business for many many years of back taxes many moons ago, so they do have a "Primacy" problem in their life skills training and background. :)
Click to expand...

Do you remember the TV show The Munsters and the niece Marilyn being the only normal one? My wife is Marilyn (in looks too) with her all of her family being Social Justice Warriors of the Anti-Trump Resistance Movement....

Just the other day I heard one of them saying Nancy Pelosi is a sell out and her head should be on a stick.. WOW!!!!
 
Ventucky Red said:
Do you remember the TV show The Munsters and the niece Marilyn being the only normal one? My wife is Marilyn (in looks too) with her all of her family being Social Justice Warriors of the Anti-Trump Resistance Movement....

Just the other day I heard one of them saying Nancy Pelosi is a sell out and her head should be on a stick.. WOW!!!!
Click to expand...

LOL. We have fun telling both flavors of political cultism in our family that they're all insane, and pretty much ruining things for all the normal people, all to support their favorite flavor of multimillionaire oligarchs.

This usually keeps their whining about "the other side" to a minimum and their complaining about whatever the TV told them to be "outraged" about down to a muted sentence or two that trails off when we just stare at them until they taper off and go back to eating their dinner.

Nothing like George Carlin's quote, "It's a big club, and you're not in it." to shut all of them up.

Or, "The going rate for box seats and 'special access to the candidate' is running $1.5M at the Presidential conventions. Let me know when one of you broke asses is going to pony up the cash to talk to one of them." That gets saved for the ones who think they're actually somehow involved in the political process. LOL.

They're slowly starting to get it that they're just the sheep arguing over which wolf is going to eat them for dinner. It'll probably take another decade or so.

I only know two people who can say they've had any sort of major legislation they pushed get passed, that had any effect at all on most people's daily lives... and they're both lawyers, one retired, both bored, both with a lot of money and I suspect, they know where the bodies are buried, to even get a national politician's attention.

Stories of their accomplishments that took years, usually shuts up the family members who envision themselves as some sort of activists who haven't been anywhere near a legislative building since they got a tour of one in grade school.

"And this is where the magic happens and these people 'represent' your views here, kids."

The first round of belief in political propaganda starts on that very day. Check out all these shiny walnut desks with microphones and the people who work here really CARE about me!

LOL. Let me know when you're on their personal Christmas card list, kids. Or the next time one of them 'representing' an average of 3.5 million people drops by for dinner and your opinion. Hahahahahahha. So funny that people actually believe that crap.
 
Ventucky Red said:
Yea.... maybe I should learn how to spell... PA Flyer... I like your example, but I got it the first time... And yes, I have recommend they talk to an accountant or someone the knows better than me.

Her is the scoop.... SIL and husband bought a house that was in a dumpy area of Seattle... SIL finds out that the house is in part of an Urban Revitalization Zone (read... they need more homes for the Amazon employees) and that their oversized (reason they bought it) lot can be zoned for development up to five units..

The list it, they sell it to a developer, they buy a brand new house cash... smart move... and now the husband wants to go out and buy a bunch toys thinking there will be no liability...

It is hard to explain this to people that think Bernie Sanders was too conservative.

Carry on!
Click to expand...
Your SIL has bigger problems than the IRS..
 
Ventucky Red said:
Do you remember the TV show The Munsters and the niece Marilyn being the only normal one? My wife is Marilyn (in looks too) with her all of her family being Social Justice Warriors of the Anti-Trump Resistance Movement....

Just the other day I heard one of them saying Nancy Pelosi is a sell out and her head should be on a stick.. WOW!!!!
Click to expand...
How do you stand living in the People's Republik?
 
Ventucky Red said:
Question

If you sell one home for lets say $1.325 Million that you paid $450,000 giving you a net of $775,000 after commissions and closing and buy another home outright for $725,000. Is the $250,000.00 (assuming a married couple takes the $500,000 one time deduction) subject to a Capitol Gains Tax.... Or because this is being rolled into another property only $50K would be subject to the Capitol Gains Tax should the not want to exercise this deduction at this time?
Click to expand...

Getting back on topic.

You are mistaken as to the tax law. You're mixing the amount of the current principal residence exemption with the old rollover-replacement rule.

There is NO provision for rolling over the capital gain of a personal residence anymore. There is also not any one-time deduction.

What there is, is an exemption of $250,000 per owner on the capital gain on the sale of house that has been your principal residence for 24 or the 60 months preceding the sale. If you and your wife are co-owners, you can exclude $500,000. This exemption can be taken as many times you want, but it can only be used every 24 months.

Note that you also need to know what the capital gain is. The net check that you get at closing is NOT the capital gain. The amount of the mortgage or equity doesn't figure into it. It is the difference between the sales price (adjusted for the commissions and other costs of the sale including any sprucing up you do to put it on the parket) less your BASIS. Your basis is what you purchased the house for, increased by any capital improvements you've made over the year.

Your capital gain will be treated (federally) as a long-term capital gain at the rate of 15% (unless you are in the outliers of income, it could be 20% if you are in the top income brackets or 0% if you're in the lower ones).

Of course, if this property isn't your principal residence, you don't get any exclusion. If it's a second home, you are really out of luck. If it is an investment property of some sort, then you've got a whole 'nuther ball of wax. It may be able to defer the gain to a later time by rolling all of it into another property. However, there's also the specter of depreciation recapture if depreciation was required (even if you didn't actually take it).
 
You must log in or register to reply here.
Back
Top