Selling house less than 2yrs, will be purchasing a bigger house with the profit. Will I get taxed.?
I have lived in my house for 1.25yrs and in the process of selling it. Will I have to pay the capital gains tax if I am going to put the profit that is made from my old house into a bigger and more expensive house?
Tags: capital gains tax
August 8th, 2010 at 5:53 am
You don’t get the $250K exclusion unless you’ve lived in the home for at least two of the past five years. There are some exceptions when you are forced to sell for employment or medical reasons, in which case you are allowed a pro-rated exclusion.
I believe you are still entitled to preferential long-term capital gains tax rate on your profit.
I believe the 1031 exchange applies only to income-producing properties.
See an accountant for more information. The tax rules aer complicated, and too numerous to go into extensive detail here.
August 8th, 2010 at 5:53 am
First, you’ll deduct the value of the improvements you made. Capital gains would be after that and after the $250000 exclusion ($500K if you’re married)
-MM
August 8th, 2010 at 5:53 am
Yes tax and if you are locked into a closed mortgage and you are Selling (or trying to negotiate a lower rate with another lender) you will be penalized. This penalty will be added to the outstanding balance of your mortgage at the lawyers when you sell. Sellers are sometimes surprised by this cost.