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Originally Posted by Chris F.
I am going to be selling my house this Fall (hopefully!) and moving into another home. By the time I will have sold the house I will have been there for a little over a year.
I have put about $25k into the house in improvements over the past year. After real estate commission, my gain on the house would be about $20k.
I guess my question is...do I have a taxable gain on the house? I wasn't sure since my improvements cost more than the gain.
I also heard that if you reinvest the gain into improvements in another primary residence that you would not have to pay taxes. Is that true?
Yours in real estate fun,
Chris F.
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You need to be there two years to use the $250k exemption if you are single or $500k if you are married. Your $25k improvements will be added to the cost basis. Didn't quite understand if you will have a $20k gain after adding the cost of improvements or the $20k gain is without the improvements.
If the net effect is that you are out of pocket $5k, then you have a loss and no capital gain issue. If not, then you do have a $20k capital gain to deal with and capital gains tax associated with it. There are some exceptions, and that is if you got a job transfer outside the area, or several other reasons listing in the IRS regs.
On your primary residence, the laws have changed, and even if you invest the proceeds in another primary residence, you will still owe capital gains tax. For your particular situation, I would advise that you consult with your CPA.