Selling Home - Tax Implications

[almondjoy22]

So here is the deal. Back in November of 2013 I bought a large fixer in a rural area ~20 miles from work. My better half and Ihave put in a ton of work (and not much cash) fixing this thing up. I recently went through a refinance and appraised at a much higher value than I paid (excepted based on comps at the time). I paid $410,000, have invested about $5,000, and appraised at $465,000. We've only been here about 7 months, so I was wondering if I were to sell the house what my tax burden would be. I'd also considering selling it to purchase another fixer property. So in short:

1) What is my tax burden if I sell the house outright? (7/24, something something, IRS website has me confused)
2) If I sold the home with the purchase of another home, my understanding is I would be exempt from taxation on the gains
3) What other properties would be eglibible for 2 above? Could I buy a condo or townhome instead of a single family?

[Drifterrider]

The over simplified answer is:

Assuming you live in the US.


The gain would be a capital gain.  If you resided in the house (it was your primary residence) you can avoid capital gains taxes (maybe) based on the math.  To get the full benefit you have to have resided in the house 2 of the last 5 years.  However, that two years time frame can be pro-rated.

The gain is sales price minus purchase price minus repairs/improvements.  You do not get to deduct for your labor.  On the plus side, you aren't hit with income taxes for your labor and self employment taxes.

So:  465K - 415K = 50K gain.
If the exempt amount for a married couple is still $500K (of gains) then that would equate to $20,833 per month X seven months = $145K.  You should owe no capital gains taxes even if you don't buy another house.

Do not take the above as tax or legal advice.  I have not kept up with the home owner's exclusions.  The amounts and terms might have changed.

[almondjoy22]

Thanks for the reply! I'm continuing to research this as well. I'm in California if that is helpful.

[waffle]

My understanding is that you can only prorate the exclusions if you had to sell the house due to certain circumstances (job change, marriage, divorce, etc...) I could be wrong though I've only done some minor research on it recently since I'm not planning on selling my fixer upper for at least another year.