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Thread: capital gains/real estate question? help.

  1. #1
    Sherpa
    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

  2. #2
    prosthogod
    From my understanding, if you are married then 500k is not subject to capital gains. If you are not, then 250k will be.

  3. #3
    Essex502
    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.

  4. #4

  5. #5
    Mandelon
    But on the bright side, if you die, though your heirs will inherit it at a stepped up basis....
    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... :2purples: :220v:

  6. #6
    SoCalOffshore
    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.

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