Author Topic: Selling house income tax  (Read 505 times)

BORN SAVER

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Selling house income tax
« on: November 02, 2018, 04:41:11 AM »
Hey guys does any one know of ways to avoid or lower paying income tax on selling your personal residence. I will have owned my house for about 12 months. I know if you hold it for 2 years you can avoid it but that wonít be an option. You guys know of any other tricks.

MoseyingAlong

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Re: Selling house income tax
« Reply #1 on: November 03, 2018, 03:43:08 AM »
My first question is how much in capital gains are you talking about?
After transaction costs and the short holding period, it may not be that much.

First thing to focus on is calculating your basis and costs of sale correctly. Are you willing to give us ballpark numbers?

Papa bear

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Re: Selling house income tax
« Reply #2 on: November 03, 2018, 05:10:45 AM »
There are some other loopholes, like if you are expecting twins, that lets you sell before 2 years because it’s a major life changing event that would require a bigger home. 


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nereo

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Re: Selling house income tax
« Reply #3 on: November 03, 2018, 08:09:34 AM »
Hey guys does any one know of ways to avoid or lower paying income tax on selling your personal residence. I will have owned my house for about 12 months. I know if you hold it for 2 years you can avoid it but that wonít be an option. You guys know of any other tricks.

you only pay taxes on the profit (capital gains) you made on the property; basically the selling price - purchase price. You can also include the closing costs (e.g. realtor and attorney fees) to the cost basis of your home, which will further reduce your capitol gains.

Short term capital gains are taxed according to your federal income tax bracket.  if you are married, filing jointly thats 12% up to $77,400 and 22% up to $165k.  The best thing you can do is to lower your federal taxable burden.  Max out your traditional IRA and 401(k)/403(b) and HSA accounts for this calendar year. If you can defer compensation until January do that too.


BORN SAVER

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Re: Selling house income tax
« Reply #4 on: November 04, 2018, 03:54:28 PM »
I bought the house at 127k and it will probably sell for 155k

BORN SAVER

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Re: Selling house income tax
« Reply #5 on: November 04, 2018, 03:55:37 PM »
And my take home pay was probably around 45k this year

BORN SAVER

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Re: Selling house income tax
« Reply #6 on: November 04, 2018, 04:13:20 PM »
I would be moving because of Iím transferring offices

lhamo

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Re: Selling house income tax
« Reply #7 on: November 04, 2018, 04:26:39 PM »
If your new work location is at least 50 miles further away from your home than your old work location, you qualify for a pro-rated capital gains exclusion, even if you did not own the house for 24 months.  See:

https://www.irs.gov/publications/p523#en_US_2017_publink100073097

BORN SAVER

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Re: Selling house income tax
« Reply #8 on: November 04, 2018, 05:11:37 PM »
Ya I currently live in Pittsburgh and would be moving to Miami. So I would be eligible for the partial I think? I donít under stand how much that would save me though

lhamo

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Re: Selling house income tax
« Reply #9 on: November 04, 2018, 05:41:55 PM »
If you are a married couple and have owned/lived in the house for 12 months at the time of sale, you should be able to exclude 50% of the typical 500k capital gains exclusion on the house, i.e. up to 250k of gains. 

If you are single, then you could exclude up to 125k in capital gains (50% of the single person's typical exclusion of 250k).

In your situation, you would likely not owe capital gains on the house sale.

nereo

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Re: Selling house income tax
« Reply #10 on: November 04, 2018, 05:49:10 PM »
Ya I currently live in Pittsburgh and would be moving to Miami. So I would be eligible for the partial I think? I donít under stand how much that would save me though

It means you are not going to pay much in taxes, if anything.  Based on what you have said, you will have about $28,000 in capital gains ($155k - $127k).

Take the number of months you have lived in your home and divide by 24. 
Then multiply by $250,000 if married, filing jointly.  That is the amount you can EXCLUDE from paying taxes.

So, if you only lived in the house for 3 months, it would be (3/24 * $250k = $31,250. 
Since $31,250 is MORE than $28,000, you will pay $0 in capital gains.

In other words, you will ONLY pay capital gains IF you lived in the house for LESS than 3 months, OR if you are filing taxes as 'single' (which requires more stpes to determine).