Posted by Tim on April 27, 1999 at 14:42:22:
You may be right. I am ashamed to call myself an REI and not be on top of the current laws with respect to personal residences etc.
Tim
Taxes Taxes Taxes…any ideas? - Posted by Rick Grimsley
Posted by Rick Grimsley on April 27, 1999 at 10:19:28:
Getting ready to sell my first rehab. Profit will be
around 25k. This is also my personal home. I am in the
15% tax bracket now. Any idea what I will have to pay
to the IRS?? Will this be around 15% also or will it put
me into a higher tax bracket for the year and cost me a
higher % of the sales profit? Any ideas for lowering
the tax hit?? I do not have a corp. now but would forming
one help??
Thanks everyone
Re: Taxes Taxes Taxes…any ideas? - Posted by Dave T
Posted by Dave T on April 27, 1999 at 15:38:44:
Consult a professional tax advisor for specific details in your situation. If you have owned and lived in the home for 2 of the 5 years prior to sale, your $25K capital gain is NOT taxable income. To exempt capital gains on the sale of your principal residence, you must have owned and occupied the house for at least 2 of the 5 years prior to sale.
There is no limit to the number of times you can take this exemption. The only rule is that 24 months must elapse before you can do it again. The maximum capital gains exemption on any single transaction is $250K if filing single, $500K if married filing jointly.
Unless special hardship exceptions apply, if you do not meet the 2 year ownership and occupancy requirement, your capital gains are taxed as ordinary income at your current marginal tax rate.
If lived in 2yrs of last 5, it’s tax free, I believe. - Posted by FJW
Posted by FJW on April 27, 1999 at 11:41:52:
1997 tax reform. Check with tax professional.
FJW
Re: Taxes Taxes Taxes…any ideas? - Posted by Tim
Posted by Tim on April 27, 1999 at 11:30:32:
Recently, new laws have allowed a one-time tax exemption for capital gains when you sell you personal residence. In other words, no tax would be due for one sale in your life time of a personal residence. I believe there are limitations as to the maximum amount of profit (I think it might be $500K). You might not want to use your exemption for a profit of “only” $25K. Use it when you sell your next home for $750,000 at a net profit of $500,000 in a few years. This should not be too hard using all the money making REI techniques you have learned (:-}.
Also depending on how long you held the investment, it might be a short term capital gain (taxed as income) or a long term cap gain (taxed at a more attractive rate scale due to recent law changes).
I guess the moral of the story is, talk to your accountant and have him/her run the numbers both ways and make a choice.
Tim
Re: Taxes Taxes Taxes…any ideas? - Posted by John(NH)
Posted by John(NH) on April 27, 1999 at 12:52:00:
I’m not sure where you got the one-time exemption from, but it’s my understanding the new law allows you to take the exemption on a personal residence not more than once every two years.