Tax Question - Selling a house under two years

[IowaStache]

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[jmusic]

I'm a little confused...  Could you clarify:

1.  A motivated seller is buying your house?  That sounds really weird... (Why is he/she motivated to sell, and yet motivated to buy at the same time??)
2.  You don't have your house listed, and it sounds like a private party deal.  Why are realtors involved at all??

Anyway, to your question: 
1.  "Improvements" do increase your cost basis; "Repairs" do not.  Paint, carpet, etc. typically is considered a repair.
2.  Tax-wise there is no difference between your two hypothetical scenarios.  Taxable amount = NET proceeds from sale - cost basis.



Edit:  i before e...  except in weird cases.

[jmusic]

Ah.  Makes more sense.  Still, you're in the "make me move" camp and once you sell, you'd either be a "motivated buyer" yourself in a hot market, or you'd be a renter.  I'd be looking for substantially above market price if it were me. 

Also, it would be wise to contact a different realtor to get a price opinion (don't mention this deal though).

[johnny847]

I'm not well versed in the tax implications of selling homes (other than you typically owe taxes on the capital gains), but the only special rule that I am aware of is $250k (or $500k if MFJ) of capital gains is excluded from taxation from the sale of your primary residence if you have lived in it for at least two years for the five year year window preceding the sale: http://www.forbes.com/sites/ashleaebeling/2013/10/24/a-costly-tax-mistake-homeowners-make/