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Sherpa
05-09-2005, 10:53 AM
here's a scenario:
buy a primary residence for 200K, live in it 10 years.
you sell it for 1.2mil. you have a "profit" of 1.0mil
you buy a replacement home (primary rsidence again) for 500K.
is the balance of that 1.0 mil (equal to 500K) free of capital gains tax???
this is about the only way I can word this question. so, anyone with
real estate/CPA/law know about this?? I can't find a website that makes
it clear to me how it all goes down.....
thanks,
--Sherpa
prosthogod
05-09-2005, 11:01 AM
From my understanding, if you are married then 500k is not subject to capital gains. If you are not, then 250k will be.
Essex502
05-09-2005, 11:06 AM
That's that correct answer. Married couple has a $500K exclusion if they lived in the home for an aggregate of 2 years of the preceeding 5. Single owner has $250K exclusion. The example would be $1.2 million sale - $200 cost basis = $1.0 million profit - $500K for a married couple = capital gains of %15 (federal) taxes due on $500K plus ordinary income taxed for California - see other states.
That's how my accountant explained it to me.
Essex502
05-09-2005, 11:08 AM
See this (http://www.bankrate.com/brm/news/real-estate/20041018a1.asp)
Mandelon
05-09-2005, 11:15 AM
But on the bright side, if you die, though your heirs will inherit it at a stepped up basis.... :rolleyes:
You could convert it to a rental for a year or so then do a 1031 exchange into something else that is like kind ( another rental) and postpone the taxes.....
But in the situation above you will owe taxes on the other $500K....probably only like $175 though... :eek: :mad: :2purples: :220v:
SoCalOffshore
05-09-2005, 04:21 PM
You are correct sir.
That's that correct answer. Married couple has a $500K exclusion if they lived in the home for an aggregate of 2 years of the preceeding 5. Single owner has $250K exclusion. The example would be $1.2 million sale - $200 cost basis = $1.0 million profit - $500K for a married couple = capital gains of %15 (federal) taxes due on $500K plus ordinary income taxed for California - see other states.
That's how my accountant explained it to me.