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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: greenmimama on March 28, 2014, 03:49:43 PM

Title: When you sell a home and make money.
Post by: greenmimama on March 28, 2014, 03:49:43 PM
Is the money you make considered your income? not talking a house flip, but your primary residence for the last 2 years.

Thank you
Title: Re: When you sell a home and make money.
Post by: Cassie on March 28, 2014, 03:52:56 PM
If it is your primary residence I think you can exclude $250,000 for one person or $500,000 for 2 from the sale.
Title: Re: When you sell a home and make money.
Post by: greenmimama on March 28, 2014, 03:58:47 PM
Yes it is our primary residence and that is what I was thinking too, but I wanted to ask.

See if anyone else weighs in.
Title: Re: When you sell a home and make money.
Post by: Cassie on March 28, 2014, 04:53:58 PM
The only other requirement is that you needed to have lived in it the past 2 years out of 5.  so for example if at one point it was a rental but then you moved back in for the last 2 years you would still meet the requirement.
Title: Re: When you sell a home and make money.
Post by: CanuckExpat on March 28, 2014, 04:58:30 PM
I think this will depend a lot on where you live. Country, any sub jurisdiction, etc..
Title: Re: When you sell a home and make money.
Post by: Cassie on March 28, 2014, 05:00:02 PM
i was assuming that she lives in the US.
Title: Re: When you sell a home and make money.
Post by: greenmimama on March 28, 2014, 05:51:51 PM
We live in the US, and when we list we will have lived here for 2 years. We as a couple could make 500k, correct? before we would have to claim it as income?

Thanks
Title: Re: When you sell a home and make money.
Post by: Cassie on March 28, 2014, 06:29:32 PM
Yes that is correct.
Title: Re: When you sell a home and make money.
Post by: Cheddar Stacker on March 28, 2014, 08:05:42 PM
Correct. You could acually do some slow flips moving house to house every 2-3 years and never pay tax on the gains. As soon as I learned about this personal residence exemption 12-15 years ago this was my million dollar idea. Never panned out. Oh well.

Even if you move before you sell it, as long as you sell the house within the next 3 years, you will be exempt from taxable gains of up to $500K assuming you are filing a joint return.

Title: Re: When you sell a home and make money.
Post by: MDM on March 28, 2014, 08:23:31 PM
In case there are some oh-by-the-ways in your situation, see http://www.irs.gov/taxtopics/tc701.html (http://www.irs.gov/taxtopics/tc701.html) and associated links for the legal details.
Title: Re: When you sell a home and make money.
Post by: greenmimama on March 29, 2014, 08:53:12 AM
Thank you all for your answers, I am especially grateful that this time they are in our favor :)

We did buy it to be a slow flip and we have lived in it as our primary residence which will be 2 years as of Aug. 10th
Title: Re: When you sell a home and make money.
Post by: Daleth on March 29, 2014, 09:34:17 AM
Is the money you make considered your income? not talking a house flip, but your primary residence for the last 2 years.

Thank you

It's not income (i.e. not taxed at the income tax rate), it's capital gains. Whether it's taxed at the short-term capital gains rate or the lower long-term rate depends on how long you've owned it. Whether it's taxed AT ALL depends on (1) whether it was your primary residence for at least two of the past 5 years and (2) how much it increased in value since you bought it.

If it was your primary residence, it has to have increased by more than $250k in order for it to be taxed (or $500k if you're married and both on the deed). In other words if you're single and it increased by $300k, you would be taxed at the appropriate capital gains rate on the extra $50k ($300k-the $250k exemption).