Placing profit from sale of home

[crc19188]

I am thinking of selling my home. Only lived in it nine months. Is there any way to get around or place profit somewhere to avoid Capital Gains Tax. Please keep politics out of your answers if you can. If you cannot make them funny. Please also need serious answers. Thanks

[retiredguy123]

Not enough information. When did you buy the house? If you bought it more than a year ago, was it rental property that was subject to depreciation? If you bought it less than a year ago, was it a new Villages house where the developer will take most of the profit? How much profit do you expect to get? If you owned the house less than a year, there will be no capital gains because the gain will be taxed as ordinary income. If so, it would probably be better to wait until you have owned it a year. You can do a "like kind" tax deferred exchange, but, unless the capital gain is substantial, it is probably not worth the effort. I would suggest discussing the options with a tax professional because all of these things will affect the decision. Also, your age and overall financial situation are important. In most cases, you cannot avoid the taxes, but you can only defer them to a later time.

[crc19188]

Bought house end of June 2021. Possible 20k-25k profit. House was pre owned. Thanks for any info. Also do you know a good tax advisor. Much appreciated.

[retiredguy123]

Bought house end of June 2021. Possible 20k-25k profit. House was pre owned. Thanks for any info. Also do you know a good tax advisor. Much appreciated.
If you are in a high tax bracket, I would wait until after June 2022 to close on the house, if you can. If so, it will be a long term capital gain and the tax rate will only be about 15-20 percent of the profit, depending on your income. In my opinion, the best option will probably be to just pay the tax. I don't think you need a tax advisor. Any tax preparer can give you the numbers.

[Rose Ann Vinci Igoe]

I am thinking of selling my home. Only lived in it nine months. Is there any way to get around or place profit somewhere to avoid Capital Gains Tax. Please keep politics out of your answers if you can. If you cannot make them funny. Please also need serious answers. Thanks

Dear friends of mine pretty much did the same thing you are thinking of doing now. Bought and sold within 7 months (they had health issues). They sold their house very fast and it almost doubled in value. Prices are going crazy now. Also, I am positive, unless the rules have changed, that as long as you bought another house Equal or higher than the amount you sold your house for, .... You will not be charged capital gains.

[retiredguy123]

Dear friends of mine pretty much did the same thing you are thinking of doing now. Bought and sold within 7 months (they had health issues). They sold their house very fast and it almost doubled in value. Prices are going crazy now. Also, I am positive, unless the rules have changed, that as long as you bought another house Equal or higher than the amount you sold your house for, .... You will not be charged capital gains.
You must live in the house as your primary residence for 2 of the past 5 years to avoid the capital gains tax. Buying another house doesn't help. Also, if you sell the house within one year of buying, the gain would be taxed at your ordinary income tax rate. Those rules have been in effect for many years.

[metoo21]

So for those that have done this do you calculate "profit" as the difference from your original cost + the new seller fees and the selling price?
In other words assume

Original asking price $200,000 and sold for $200,000
Your Buyers closing cost $10,000
Actual cost to buyer was $210,000

Now when selling, do you use the $210,000 as the original price/cost?

Then when you sell at a list price of $250,000 and then pay the your sellers closing costs of $15,000, you actually get $235,000 cash so you get a $25,000 profit. Or do you count the $10,000 of the original buyer's cost in the equation at all?

[villagetinker]

OP, you are asking the wrong people, you need to ask a TAX expert, IMHO, there are way too many variables that need to be considered.

[retiredguy123]

So for those that have done this do you calculate "profit" as the difference from your original cost + the new seller fees and the selling price?
In other words assume

Original asking price $200,000 and sold for $200,000
Your Buyers closing cost $10,000
Actual cost to buyer was $210,000

Now when selling, do you use the $210,000 as the original price/cost?

Then when you sell at a list price of $250,000 and then pay the your sellers closing costs of $15,000, you actually get $235,000 cash so you get a $25,000 profit. Or do you count the $10,000 of the original buyer's cost in the equation at all?
It depends. The buyer's closing costs are typically not included in the cost basis, especially those related to getting a loan. The seller's costs typically are included in reducing the taxable gain if they are related to getting the house sold. I would suggest using TurboTax to assist you in listing every cost to see which are and are not included. When you sell a house, you will get a 1099B from the closing company declaring the proceeds that you received from the sale. That is the amount reported to the IRS, but it does not include your cost basis that you will subtract from the sale proceeds.

[courtyard]

I remember decades ago when you had to be over 50 years old to sell your house without penalty. Then "they" changed the rules which led to people flipping homes, destabilizing neighborhoods and leading to the 2008 real estate crash.

[retiredguy123]

I remember decades ago when you had to be over 50 years old to sell your house without penalty. Then "they" changed the rules which led to people flipping homes, destabilizing neighborhoods and leading to the 2008 real estate crash.
The rule where you need to use the house as your primary residence for 2 of the past 5 years to exclude the capital gain, went into effect in 1997. But, you still need to live in the house for 2 years, which makes it difficult to do a lot of flipping.

[TNLAKEPANDA]

Talk to your tax person however I believe that you have to own the home for one year to avoid taxes. You might want to plan a closing after the one year period.

[Stu from NYC]

OP, you are asking the wrong people, you need to ask a TAX expert, IMHO, there are way too many variables that need to be considered.

Good advise, what happens OP if well meaning people gives you advise that causes you to pay several thousand dollars extra to the IRS?

[petsetc]

In the OP case, there is no way to avoid a taxable gain. If you don't own the house for a year+one day, the profit is ordinary income. After that, it is taxed as a capital gain. Yo might be able to defer taxes through a 1031 exchange but if you don't already know what that is, probably you don't to get involved.

The capital gain is the sale price reduced by original cost+selling cost (commissions-renovation/stuff you had to do in the 90 days prior to the sale-etc)+capital improvements you made (swimming pool, roof,etc)+monies you paid on behalf of the buyer(title insurance,buyers assistance,etc). Google it, it is all straight forward.

Use turbo-tax to do a mock-up or seek professional advice.

My best advice is to sure your closing date is after 1 year and 1 day of purchase!

FWIW

[retiredguy123]

In the OP case, there is no way to avoid a taxable gain. If you don't own the house for a year+one day, the profit is ordinary income. After that, it is taxed as a capital gain. Yo might be able to defer taxes through a 1031 exchange but if you don't already know what that is, probably you don't to get involved.

The capital gain is the sale price reduced by original cost+selling cost (commissions-renovation/stuff you had to do in the 90 days prior to the sale-etc)+capital improvements you made (swimming pool, roof,etc)+monies you paid on behalf of the buyer(title insurance,buyers assistance,etc). Google it, it is all straight forward.

Use turbo-tax to do a mock-up or seek professional advice.

My best advice is to sure your closing date is after 1 year and 1 day of purchase!

FWIW
I agree. But, using a 1031 exchange to defer a $20-25K capital gain would never make sense to me.

[manaboutown]

In the OP case, there is no way to avoid a taxable gain. If you don't own the house for a year+one day, the profit is ordinary income. After that, it is taxed as a capital gain. Yo might be able to defer taxes through a 1031 exchange but if you don't already know what that is, probably you don't to get involved.

The capital gain is the sale price reduced by original cost+selling cost (commissions-renovation/stuff you had to do in the 90 days prior to the sale-etc)+capital improvements you made (swimming pool, roof,etc)+monies you paid on behalf of the buyer(title insurance,buyers assistance,etc). Google it, it is all straight forward.

Use turbo-tax to do a mock-up or seek professional advice.

My best advice is to sure your closing date is after 1 year and 1 day of purchase!

FWIW

The OP wrote he had lived in the home nine months. To qualify for a 1031 tax deferred exchange a property must be an investment property, not one's personal residence. Are you eligible for a 1031 exchange? (https://blog.firstam.com/bid/69185/Are-you-eligible-for-a-1031-exchange)

[Babubhat]

Please don’t use free tax advice. The irs requires code and regulations to support your conclusion,. Consult a qualified professional.

[Bridget Staunton]

Don’t forget to add the changes/updates/improvements you made to the house to the cost basis which becomes your new base

[MidWestIA]

You can ONLY avoid tax if you have not sold a house within 2 years

[kkingston57]

Your ? has created more ?s than answers. Suggest getting an opinion from a tax attorney or good tax accountant.

[La lamy]

If you were Canadian there would be no tax implications from selling your primary house. It's the best investment we have in Canada.

[Mrprez]

So much bad and outdated advice here.

[Jean G]

Are you not aware of the stipulation in your purchase contract it said if you sold your home in less than a year that all profit would go to The Villages? Don’t sell until a year and a day
This is if you bought a new home

[TommyT]

Relative bought a home in an area that turned out to be awful. After a year and a half, they decided to sell. They listed for what they paid including closing costs, but ended selling it for less. No gains so they never reported the sale, even at a loss. They just wanted out of the crime ridden slums..

What are your thoughts on that ??

:popcorn:

[Mrprez]

Are you not aware of the stipulation in your purchase contract it said if you sold your home in less than a year that all profit would go to The Villages? Don’t sell until a year and a day
This is if you bought a new home

Less improvements.

[dyoder66@aol.com]

Get old and sell primary home

[joelfmi]

I am thinking of selling my home. Only lived in it nine months. Is there any way to get around or place profit somewhere to avoid Capital Gains Tax. Please keep politics out of your answers if you can. If you cannot make them funny. Please also need serious answers. Thanks
What is the negative reason why you are selling?

[mark100]

Suggest you use a CPA or your tax person to answer. There are to many variables to get the correct answer.

[triflex]

I just did this before moving here. Have to wait til 2 years has passed to get tax free. I listed it 2 months before that date arrived with a stipulation that it could not close sooner than the exact date I purchased 2 years prior. I had an offer 8 minutes after it went live on a no-fee FSBO listing (Zillow).

I paid the buyer broker 2% commission and could have gotten away without even doing that. But to me it was worth not having to deal directly with a buyer.

Unless one can find an investment that pays a much as the cap gain on the house (minus taxes, fees, HOA, etc), I'd wait til 2 years passed. Interest rates are going up though so there is that to worry about.

[rferg40]

Dear friends of mine pretty much did the same thing you are thinking of doing now. Bought and sold within 7 months (they had health issues). They sold their house very fast and it almost doubled in value. Prices are going crazy now. Also, I am positive, unless the rules have changed, that as long as you bought another house Equal or higher than the amount you sold your house for, .... You will not be charged capital gains.

That law changed during the Clinton administration, so you are a little behind in your tax law. Only way to avoid the income tax on the sale is to go through a "Starker Exchange". Realtors should know about those and those of us who do tax returns do as well. Not all that easy to do with residential property and there are fees involved. And I think the rules for Starker exchange of residential property in Florida are more complicated than other states. Sold my vacation rental/ second home in TV in June and I will be paying tax on the profit.

[manaboutown]

That law changed during the Clinton administration, so you are a little behind in your tax law. Only way to avoid the income tax on the sale is to go through a "Starker Exchange". Realtors should know about those and those of us who do tax returns do as well. Not all that easy to do with residential property and there are fees involved. And I think the rules for Starker exchange of residential property in Florida are more complicated than other states. Sold my vacation rental/ second home in TV in June and I will be paying tax on the profit.

A Starker Exchange is a 1031 exchange so it needs to be an investment property. A sale of a personal residence does not qualify. https://www.washingtonpost.com/realestate/starker-exchange-lets-you-defer-capital-gains-taxes-on-investment-real-estate/2012/02/06/gIQArhil4Q_story.html

[DAVES]

I am thinking of selling my home. Only lived in it nine months. Is there any way to get around or place profit somewhere to avoid Capital Gains Tax. Please keep politics out of your answers if you can. If you cannot make them funny. Please also need serious answers. Thanks

I would not, you should not, post information that IS necessary for a VALID reply. ASK YOUR ACCOUNTANT. As posted been in the home for nine months. It is not capital gains it is a short term gain taxable at your highest tax rate. After selling expense, money put into the home, etc etc etc your, "profit," may not be what you think it is.

As far as,"funny." Should you be audited, the IRS will surely see the humor in but, I asked DAVES and he said

[Topspinmo]

Good advise, what happens OP if well meaning people gives you advise that causes you to pay several thousand dollars extra to the IRS?


That funny. IRS CAN Catch underpayment but not over payment. So who’s getting cheated :1rotfl: