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here's a scenario:
buy a primary residence for 200K, live in it 10 years.
you sell it for 1.2mil. you have a "profit" of 1.0mil
you buy a replacement home (primary rsidence again) for 500K.
is the balance of that 1.0 mil (equal to 500K) free of capital gains tax???
this is about the only way I can word this question. so, anyone with
real estate/CPA/law know about this?? I can't find a website that makes
it clear to me how it all goes down.....
thanks,
--Sherpa
From my understanding, if you are married then 500k is not subject to capital gains. If you are not, then 250k will be.
That's that correct answer. Married couple has a $500K exclusion if they lived in the home for an aggregate of 2 years of the preceeding 5. Single owner has $250K exclusion. The example would be $1.2 million sale - $200 cost basis = $1.0 million profit - $500K for a married couple = capital gains of %15 (federal) taxes due on $500K plus ordinary income taxed for California - see other states.
That's how my accountant explained it to me.
But on the bright side, if you die, though your heirs will inherit it at a stepped up basis.... :rolleyes:
You could convert it to a rental for a year or so then do a 1031 exchange into something else that is like kind ( another rental) and postpone the taxes.....
But in the situation above you will owe taxes on the other $500K....probably only like $175 though... :eek: :mad: :2purples: :220v:
You are correct sir.
That's that correct answer. Married couple has a $500K exclusion if they lived in the home for an aggregate of 2 years of the preceeding 5. Single owner has $250K exclusion. The example would be $1.2 million sale - $200 cost basis = $1.0 million profit - $500K for a married couple = capital gains of %15 (federal) taxes due on $500K plus ordinary income taxed for California - see other states.
That's how my accountant explained it to me.