Tax implications buying a new house, carrying two houses until move

[gatorNic]

Hi, so my wife and I are in escrow for a new house.  We currently own a house, both in California. We plan to carry both houses until we can move. Potentially doing work in the new house before we get there.

We are tackling the question of listing/moving asap before the end of the year vs carrying the house into January for various reasons.  The main question I have are there any tax implications in carrying and selling the old house this year vs early next year?

edit: Forgot to mention I understand there are capital gains on a house sale.  We should be under the 500k gains limit, so we are ok with that.  It was more to the point of..is there any difference in selling the house this year vs next year?  Even though the intent is to sell it, since you can only have one primary residence it is technically considered a investment property even for a short time does that affect anything?

[bacchi]

It's not a rental property unless you intend to rent it. It's a second home.

[talltexan]

Can you confirm that your lender is asking you to sign a document stating intent that new house will eventually be your primary residence?

[Sibley]

The old house, when sold, will need to be reported for taxes. If you sell it in 2021, then it'll go on your 2021 taxes. If you sell in 2022, then it'll go on the 2022 taxes. Assuming you qualify for the exclusion on sale of primary home deduction, that shouldn't change for either year. If capital gains tax rates change between tax years, that may impact you.

The old house would just be a 2nd home. Not a rental, not investment property. As long as you don't sit on it for 5 years and lose the sale of primary home exclusion, you're fine.

Much more pertinent is the fact that you're carrying two houses. Two mortgages (if you have them), two sets of real estate taxes, who sets of utilities, two sets of exterior maintenance, etc. That adds up, quickly.

[gatorNic]

Thanks for the input everyone.  I think Sibley you hit most of the main points.  I think you are right with the 5 years home exclusion. I ran across this:

https://www.irs.gov/taxtopics/tc701 - Basically just saying as long as you live in it for 2 years out of the last 5 you can take the exclusion on sale. Year of sale shouldn't matter. 

Yes I understand the carry cost, it is heavy on my mind. The new mortgage would start in December. List old house end of January with hope to close by end of Feb. We would have to eat Dec, Jan, Feb. Hopefully not in to March, but you never know.  Can also probably turn off some utilities or at least turn down ones in use. 

I was just worried there was something I wasn't thinking of in terms of tax or gotcha.  So far I haven't found any, as long as you stay within those rules of 5 years and not renting it out.