Profile picture for user0659837

Having lived in the same home for 40 years, what will this do to my capital gains next year?

no mortgage...
  • November 27 2012 - US
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Answers (7)

Profile picture for wetdawgs
It is very hard to predict what will/would happen if they discuss and vote on removing the capital gains exclusion on primary residences.      The crystal ball is foggy.   I'd prefer that they remove the mortgage interest deduction, but I'm sure that would be received with horror!

  • November 27 2012
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Profile picture for user0659837
Thanks to all for very pertinent replies. However, I heard on CNBC within the last month that Congress is thinking of doing away with the 250000/500000 exemption for capital gains on the primary residence (next year).
I was hoping to stimulate a conversation around this issue. Does anyone know if they are considering passing this to start in 2013?

Single,  32900 original price...now fallen to around 200000. about 25000 in inprovments.
  • November 27 2012
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Profile picture for Ofe Polack
The best way to go about it will be to contact your accountant and ask them to work out the details.  We do not know how much you paid for it, any improvements that you may have done, its present condition, your marital status and/or how much will it sell for in todays market.  The accountant will have all those details and will work it out for you. 
  • November 27 2012
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Profile picture for wetdawgs
It depends on your cost basis (purchase price plus capital improvements plus selling costs) vs your actual sales price, whether or not it has been your primary residence for 2 of the last 5 years, and whether or not you are married  and spouse has also had it as primary residence for at least two of the last five years.

If you are lucky, you will have no capital gains tax.

Example:  Rough calculations:

Purchase price:   $25,000
Cost of selling:  $24,000 (ouch!)
Addition of family room:   $20,000.
Cost basis:   $69,000

Sales Price:   $400,000
Capital gains:  $400,000 - $69,000 = $331,000.

With the exclusions for capital gains on sale of primary residence:

Married couple:   $331 k is less than $500 k so no capital gains tax.
Single person:  $331 k is more than $250 k, so capital gains tax on $81k.









  • November 27 2012
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Well, the primary is tax exempt up to an amount. Individuals can exclude up to $250,000 in profit from the sale of a main home (or $500,000 for a married couple) as long as you have owned the home and lived in the home for a minimum of two years. Those two years do not need to be consecutive. In the 5 years prior to the sale of the house, you need to have lived in the house for at least 24 months in that 5-year period. The capital gains tax is up in the air for next year. It could go from 15% to 20% depending what the congress does.

Tim
  • November 27 2012
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It is not 100% exempt if I recall...more like 250k for a single owner, or 500k for a couple that files their taxes together.

Contact your tax professional for concrete advice since they will probably know exactly how the change will impact you--if at all.

Best wishes from So-Cal and good luck
  • November 27 2012
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Profile picture for Kabaju42
For tax puroposes, nothing. The primary home is exempt from those taxes.
  • November 27 2012
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