Re: Taxes??? - Posted by Dave T
Posted by Dave T on May 30, 2000 at 10:48:07:
Consult a tax professional for guidance as it relates to your specific circumstances.
In general, since you did not live in the property two years, your profit is ordinary income and taxed at your marginal tax rate. If you are in the 28% bracket, then you should reserve 28% of your profit for taxes. Your tax professional can help you compute and file your quarterly estimated tax returns so you can avoid a penalty for underpayment on April 15.
There are some specific hardship circumstances that may permit you to use the capital gains exclusion on your primary residence even though you fail to meet the 2 year occupancy requirement. Consult your tax professional to see if you qualify.
In the future, if you plan to buy fixers, live in them, then sell them, you should occupy the house for two years. This way you meet the two year ownership and occupancy requirement to have all your sale profit TAX FREE.