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Old 12-04-2009, 06:09 PM   #1
nostalgia
 
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So I'm buying a house (yay!). I didn't make the purchase contingent on selling my current house for several reasons, but now I'm wondering about the tax implications.

My understanding of capital gains tax on a house sale is you won't have to pay it if you're using the money to buy a new house. But what about my situation, where I'm using my savings for the down payment on the new house and will replenish it later with the sale of the existing house?

Thanks for any advice,

-Joe
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Old 12-04-2009, 06:16 PM   #2
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You've got two years.

Old info: see below.
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Old 12-04-2009, 06:31 PM   #3
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Congrats on the home purchase!

On a primary personal residence (i.e. not a second home or investment/rental property), capital gains taxes do not apply unless you have over $250,000 of gain ($500,000 if married and filing jointly) regardless of what you use the proceeds for. So, it does not matter when you purchase your new home as long as the gains on your old house are less than $250,000 (Selling Price - Purchase Price + Basis Adjustments). Basis adjustments are things like rennovations - things beyond normal repairs and maintenance. If you gains are greater than $250,000 you have to pay capital gains regardless of what the proceeds are used for.

The 2 year rule that David is speaking of was changed in the late 1990's to the above.

Again, the above applys only to primary personal residences. If you're selling an investment property or second home, let me know and I'll explain those rules since they are different.

Here's an article that explains it pretty well: http://www.bankrate.com/finance/real...-owners-1.aspx

Disclaimer - The above is for educational purposes only and is not to be construed as tax advice. Contact a CPA or tax attorney licensed in your state prior to making any determinations regarding federal or state taxes owed.


 
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Old 12-04-2009, 06:36 PM   #4
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Awesome, thanks guys. The house I'm selling would list around $250k, so there's little chance of making that much on it

-Joe
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Old 12-04-2009, 06:36 PM   #5
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I am no accountant, but have taken more accounting classes than I have wished to. David may very well be right though. I don't think that it'll change between states, but you might want to check.

I would also check out money.cnn.com 's money 101. It'll give you the basics of everything you'll want to work your way through.

 
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Old 12-04-2009, 08:15 PM   #6
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Quote:
Originally Posted by cford1 View Post
I am no accountant, but have taken more accounting classes than I have wished to. David may very well be right though. I don't think that it'll change between states, but you might want to check.

I would also check out money.cnn.com 's money 101. It'll give you the basics of everything you'll want to work your way through.
Capital gains is a federal, though some states may charge capital gains, tax and is independant of what state you live in. What bopper said is exactly right. The only thing I would include is that the capital gains exemption only applies for a primary residence that you've lived in for at least 2 years.

 
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