LT Capital Gain Rate on sale of home

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  • #5150
    tedbackmann
    Participant

    I will have an approx gain of 250K over the 500K couple exemption.
    My normal taxable income is 80K. Somewhat confused what the CG rate
    will be

    #5151
    The PA Investor
    Participant

    You could pay nothing on capital gains taxes by using a 1031 exchange. It’s where you use that money from the sale of your previous home, including the gains, to buy another house for the same price or one that’s more expensive. You can continuously do this strategy until you die. Then the capital gains will be forgiven.

    So you could use that 250k into another home and not pay the capital gains taxes on it yet. Beware you will have to do this strategy again when you sell the next house. Just keep repeating it until you’re dead.

    If you choose to do this, you have 45 calendar days to identify new properties from the sale of your house. Then you have 180 days to close on the new property.

    #5152
    kaneohe
    Participant

    https://www.irs.gov/taxtopics/tc409

    CG rate for MFJ is 15% for taxable income approx. 79K to 489K. Your taxable income is about 80K + 250K = 330K so you fall in that category.
    You may also be subjected to the NIIT tax (3.8%) on the the part of the
    CG that makes AGI > 250K.

    #5153
    kaneohe
    Participant

    I thought 1031 exchanges only applied to business property like rentals and not to personal residences unless you turned them into rentals before selling?

    • This reply was modified 1 year, 8 months ago by kaneohe.
    #5157
    tedbackmann
    Participant

    Thanks kaneohe. Just what I wanted clarification on. We are downsizing and this is the end-result of 3 house upgrades over the last 50 years

    #5175
    The PA Investor
    Participant

    You can use a 1031 for any type of real estate from rental, commercial or private. Typically a 1031 is for a similar real estate type, loan amount and loan length.

    #5188
    The PA Investor
    Participant

    I made a mistake about using a 1031 exchange for private residences but you can use it for rental or commercial properties. Thank you for clarifying kanehoe.

    #6657
    Lewis-H
    Participant

    The long-term capital gains tax rate is 0%, 15% or 20% depending on your taxable income and filing status. They are generally lower than short-term capital gains tax rates. Capital gains tax rules can be different for home sales.

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