Question

Tax on real estate proceeds

Forum|Forum|3 years ago
November 16, 2022
1 reply
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Hi,

If I sell my home (primary residence) and relocated for a job, is there any way to get around paying taxes on the proceeds of our home if we don't buy a new home right away? With interest rates and the house market as is, we don't want to buy another home yet, but maybe in a year. Any suggestions are helpful.

Thanks so much for having this event!

KochuK

Hi RebeccaL, thanks for attending the event and post questions.

When selling a main home/principal residence, first thing, you would want to check for the "home sale gain exclusion" if qualified.

The maximum exclusion of gain is $500,000 if Married Filing Jointly ($250,000 for other filing status.)

Please refer to IRS Pub 523 Selling Your Home, pages 3-4 for Eligibility tests.

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

Any gain over the exclusion or if you do not qualify for the exclusion is subject to capital gain tax rates of 0%, 15% or 20% depending on your taxable income, plus 3.8% surtax for upper income taxpayers.

Additionally, please gather information on selling/closing costs, major improvements made over the years, purchase settlement costs to add to the home cost basis.

Below link page 5, Table 1 has examples of Increases and Decreases to Basis

IRS Pub 551 Basis if Assets

https://www.irs.gov/pub/irs-pdf/p551.pdf

Just for your information, loss of sale of personal residence is not deductible, and there is no 1031 exchange on personal residence. It is available for investment property.

Hope the above helps. Thank you.

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