Quote:
Originally Posted by cjh-ohio
I sold my home in Ohio Jan 2017 and bought in The Villages. Now I want to sell and downsize. Is it true that I may get penalized with capital gains taxes because I sold 2 homes in less than 2 years? My deceased husband built our home in Ohio, so it appears I made a lot of profit because there was little labor costs incurred.
Now I am hesitant to sell. Any advice?
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Hello, cjh-ohio,
I will put my two cents worth in to try to help you, but first of all, the best advice I can give you is to meet with a CPA. (I am a retired English teacher who, for some reason, has an interest, and a bit of a feel, for how to manage taxes in order to protect investments, whether they are on paper or we are living in them. But I always run any questions past a CPA. I hope you will, too.)
Unless it has changed (and I don’t think it has) the Taxpayer Relief Act of 1997 allows $250,000 to be exempt from cap gain tax for a single person. The exemption is $500,000 for a couple. This has been for primary residence sales only. (But I do not know if the recent tax law changed that part.)
Keep in mind that the operative word there is ‘gain.’ It is not just the buy-sell part. I always keep a folder of any improvements done to our houses. Those costs can offset the gain. (I think the costs associated with the selling process also can be included to offset the gain.).
The sale of a secondary residence has meant a capital gain on all profit, none of those generous exemptions of the 1997 tax law change, but keeping those good records could help to close the gap for secondary residence cap gain tax, too. (Again, I do not know if that has been affected by recent tax law changes.)
You say here that you sold the Ohio house in January 2017 so that puts you past the two year mark for the sale of a primary residence. (if that is still the tax law.)
Having owned 9 houses, all primary residences except the one in TV, I well remember the days when capital gains tax was on all profits unless invested in a more expensive house. There are lots of McMansions in Midwest suburbs. Many were built as a result of corporate moves by people from larger, more expensive cities, especially in the late 80s and the 90s until the tax law changed in 1997. I must say I loved that tax law change. It freed a lot of people to live their lives and not to have to choose to either buy a too big house or turn all profits over to the government. After 1997, sellers could downsize and keep the change.
Oh my! If you are still reading, please forgive my tendency to write a dissertation sometimes — when a topic catches my attention on TOTV. Real estate and the stock market and taxes all happen to be among my favorite topics to discuss. (I have no idea why.)
Anyway, my best advice is the first advice I gave to you. Please see a CPA. Bob Bloom, CPA, who has advertised on here, is a good guy. I do not have his phone number but someone here should be able to share it. I recommended him to a friend in TV and she really liked him. He lives in TV and came to her house to help her. She was very happy with his work. And— this friend is one who knows her stuff.
I suggest finding Bob Bloom if you want/need to talk to a CPA.
I wish you the best as you navigate through this.
Boomer