Real Estate gains and taxes

Chris F. · #1 09-28-2005, 02:09 PM

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.

Sponsored Links

motordavid · #2 09-28-2005, 02:16 PM

CF: Read this link...from the back of the napkin it looks like you can add legit improvement costs to the "cost basis"; where it gets you is the less than 2 yr
deal and, espc. the Less than 1 year deal. You might be looking at Ordinary Income tax rates on the adjusted gain. ;>(

How 'bout hanging at least past the one year to cop the 20% max long term gain?
GL,md

http://www.grubmanfinancial.com/main...ibrary_000.htm

And, this from our friends at Big Brother:

http://www.irs.gov/pub/irs-pdf/p523.pdf

somewhereinla · #3 09-28-2005, 02:18 PM

You probably need to talk to your cpa, as tax laws change every years. But from what I understand improvment for a house should be tax deductible.

Phester · #4 09-28-2005, 02:53 PM

Quote:

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.

You need to have the primary residence over 2yrs for the 250k exemption.

Improvements do increase the basis in your home.

Over one year gets youy cap gain rates...

(are you sure you did not put in another 20k?)

AutoXer · #5 09-28-2005, 05:32 PM

Quote:

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.

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.

Chris F. · #6 09-28-2005, 07:45 PM

Thanks guys. Yes, I am actually looking at a loss. There is a 20k appreciation and then the 25k in improvements. To that end, I could write off the loss in taxes is that correct?

(I know I should consult my CPA, I'm just asking for general advice

)

Chris

LeMansX5 · #7 09-28-2005, 07:50 PM

Chris, Question if you don't mind. Are you using a realtor to list or using the flat-fee listing to get the house on MLS, realtor.com etc. I ask because I am in the same boat as you right now..

Phester · #8 09-28-2005, 08:00 PM

Quote:

Originally Posted by Chris F.

Thanks guys. Yes, I am actually looking at a loss. There is a 20k appreciation and then the 25k in improvements. To that end, I could write off the loss in taxes is that correct?

(I know I should consult my CPA, I'm just asking for general advice

)

Chris

Nope, can't take the loss

Chris F. · #9 09-28-2005, 09:27 PM

Quote:

Originally Posted by LeMansX5

Chris, Question if you don't mind. Are you using a realtor to list or using the flat-fee listing to get the house on MLS, realtor.com etc. I ask because I am in the same boat as you right now..

I am using a realtor....I need this persons expertise in finding the right neighborhood, not to mention handling the transaction of this house. Once I get a house or two under my belt I might try to do it myself...but not right now

That's why I'm going to end up having a net loss, but so be it...