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If I buy a home that is more expensive than the one I just sold, is there capital gains tax?

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June 06 - US
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Answers (2)

That last answer looked a little confusing so I'll take a shot.  The price of the new home does not matter anymore. 

As long as you have lived in the house any two year period of the last 5 you get the exemption of:

$250,000 for a single person
$500,000 fr a married couple above the price paid for acquisition including closing costs, "The Basis"

This is talking about PROFIT.

Examples
1.     Bought for $300,000 3 years ago by a married couple. Just sold for $750,000 - $450,000 profit or gain.   No capital gains tax due on the sale.

2.    Bought for $300,000 18 months ago, same married couple.  Just sold for $750,000.  Taxes due on $450,000 (less than 2 years in the home.



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June 06
Capital gains tax is realized when you sell your home.   If it's an investment home versus a primary residence, your realized tax implications differ.  

If your home is a primary residence and you lived in it for less than 2 years out of a five year period and you realized capital gains after selling, typically you will be taxed at your normal income tax rate.   If you lived in your home 2 years of a five year window and sold your home, whatever you realized in capital gains would be tax free for the following:

1.  Single person, tax free up to $250k in gains.  
2.  Married couple, tax free up to $500k in gains.

Investment properties and tax rates would differ depending on how long you own the home.   Less than one year would be considered short term capital gains and over one year of owning the home would be considered long term capital gains rates.  Consult your accountant for specifics.

Hope this helps!

Jason LaFlesch
Arizona Investment Link
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