Posted by dealmaker on August 09, 2005 at 08:28:39:
ANY expense that you pay relative to the sale is deductible from the proceeds to figure your net gain. I wonder what the “comparitive market analysis” that was done for the previous seller said it would sell for, before they sold it to you for $147K. In my experience these numbers are highly suspect. Often devised by RE agents trying to “buy” the listing.
On Frank Chin’s post about the law being tweaked if you live in your residence less than two years; that only has to do with “unusual circumstance”. So if you got a job transfer, severe health issue or something else life altering.
Heck if you love the house, live in it. THAT’S WHAT THEY’RE FOR. You have other investment property.
Posted by Linda Johnson on August 08, 2005 at 07:01:31:
I am in Tennessee. I recently bought a restored historic home for $147,000. It is now worth $225,000 (3 months later). I also own two other houses I have rented with lease agreements. If I sell my home and put the money into another home will I have to pay capital gains tax or will there be other fees or penalties? I was told this would fall under the category of “flipping”.
Posted by dealmaker on August 08, 2005 at 21:01:15:
Well the good news is that you’ve made a quick gain, that’s assuming that you can sell it for $225K. You’ll also have some selling expenses, etc.
Since you’ve owned it less than one year it will be short-term gain, which is taxed at your ORDINARY INCOME rate. But you don’t pay social security on it.
Putting the money into another property doesn’t do anything for you. I’m not sure why people always think this, probably a hangover from the OLD tax law, which IIRC changed in the '80s. I’m guessing this is your residence so you’d have to live there 24 months to get the gain tax free.
Posted by Frank Chin on August 09, 2005 at 07:08:49:
Dealmaker:
The way I read it, she mentioned she sold “her own home”. While it’ll be tax free if she lived in it for 2 out of 5 years, I recall the tax laws been tweaked for tax advantages for even less time.
Posted by Linda Johnson on August 08, 2005 at 21:22:29:
Dealmaker,
Thanks for the info. The selling expenses you mentioned, are these just the usual closing costs, etc? Does this qualify as a “flip” as I was told by a mortgage broker?
According to a comparison market analysis I had done on my house I should be able to sell it from $219,000 up to $225,000. That is the only reason I would sell because it is my residence and I truly love this house.