Capital Gains Tax on Selling a TV Property and Buying another Property
 

Can anyone give me a quick and dirty refresher? Here is my circumstance: Bought a CV in December 2020. Rented it for two years, then became a FT Florida resident and have lived in TV since 2023. Filed Federal and State taxes for 2022 in another state.

If we sell and buy another property here, I understand that there is no Florida Capital Gains tax but the Federal Capital Gains tax still applies. However, in Florida the rules are that one must own the property AND be a Florida resident for at least two years to avoid any Capital Gains? I do know to take the sale of the property and add any expenses due to updating the property in order to calculate the left over equity for which I will have to pay taxes. Capital Gains are also dependent upon income level as well.

Am I correct or can someone correct me on any of the above? Thank you in advance.
We do not have a Trust set up in Florida yet - should we do that first? We would like to sell/buy in the very near future.

-Lisa

You will only pay capital gains at the federal level, since there is no state tax in Florida. If you lived in the home for 2 years, you would be exempt from those capital gains up to $250k for single, $500k for married. Yes, add every expense you can to increase the cost of the home, which reduces your profit and capital gains.

Great question and great answer. Also isn't the first $80,000? of capital gains taxed at 0%

I think that "$80,000" you are referring to is for the $89k taxable income exclusion for a long term asset and filing married. So, we have ventured outside of the OP's "quick and dirty". For tax year 2023, to qualify for a 0% rate on capital gains, you need to have less than $44,625 in taxable income if you are single and $89,250 for married and the capital gain characterizd as long term.

Check with a CPA, especially if you depreciated the property while it was rented and expensed or capitalized various costs.

The rate varies and depends on your income. You can even end up with an extra 3.8% tax if your income is high enough. Could also push you into the Alternate Income Tax. Then if you are on Social Security your medical insurance costs could also increase. Thus if you have a large capital gain you are thinking of taking be sure you understand your tax obligations. Fortunately most of us will not have this problem.

As other have said, consult a CPA.

The post quoted, is very relevant. I recently sold some property, including a personal residence and trust me, the supposed 15% Long Term Capital Gains Tax (under $492,301) turned out to be way closer to 20%, plus a major increase in Medicare costs.

"IF" you depreciated? Hopefully, the OP did, otherwise, they will be back on TOTV asking why the IRS wants to recapture all the depreciation expense even if they didn't take advantage of this tax saving expense.

I do believe the IRS code says you MUST treat the depreciation as ordinary income, even if you DID NOT TAKE IT. If that be the case, you might want to amend previous returns. Also, as I recall, there is a 3-year look-back period to get (additional) refunds, after that it is gone.

Depending on the total $ involved, I would recommend a Enrolled Agent more than a CPA.

I agree , I’ve sold a total of 14 homes and condos here in Florida including 6 homes here . While there is much helpful information on here and some people seem to really know what there talking about , the only people that I would rely on for information on taxes and other legal issues is someone who is actively doing it for a living right now

I would advise you to speak to your CPA instead of the guessing game with zero knowledge of your taxes

Find a CPA or law firm summary online. They write on this topic frequently. Tax ability depends on individual facts and circumstances. Sample below

Tax Issues When Converting a Rental to Your Personal Residence | Professional Tax Services

Is the home your primary home now?

She rented the home out, this wasn’t her primary residence. You got another issue that I had to deal with and that’s when you buy another ‘like’ place, which means you will need to buy another rental or you will be taxed more at the federal level.
Can You Avoid Capital Gains by Buying Another Home? | SmartAsset

I would 2nd the recommendation for an Enrolled Agent vs. a CPA or Attorney. The reason for this recommendation is that EAs (enrolled agents) are usually only involved in Tax matters and are required to attend education concerning Taxation. CPAs are more likely to be involved in small business and other business and personal financial matters and their education covers a broad spectrum of accounting. Attorneys are involved in all types of legal matters unless they are a Tax attorney. If they are a Tax attorney their interest would be in Tax Court cases and not personal taxation. It is possible that a CPA or Attorney would deal only with Tax matters, but its not likely.

From what was described you will have Depreciation recapture and you will have Federal capital gains. You cannot escape the depreciation recapture, but if you live in the house for 2 years or more as your personal residence you may escape the federal Capital gains. You would be well advised to check with an EA or other tax professional.