You pay taxes on the PROFIT. The trick is how creative you can be in the cost section.
By the way, you don’t have to pay taxes on the cash out from the refinance. That $50K is tax free until you sell the home and then the formula above applies.
Posted by J D Cummings on January 16, 2003 at 19:01:44:
Question? For simplicity sake …these numbers…
If I build a duplex borrowing 50,000.00
Refinance it after construction for 100,000.00
sell it 2months later for 110,000.00. DO i pay taxes on just the 10,000.00???