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October 24, 2007
selling brownstone + capital gain tax
I'm looking to sell a brownstone, downscale and buy an apartment.
I've been given conflicting information regarding tax implications of selling property and would really appreciate if anyone has any further clarification so I can do the math correctly.
I've been told it is still possible to rollover capital into another property (thus defering tax payments) within the year end/12 months of sale.
I've also been told that, instead, on any gain there is a tax exemption on the amount of $250,000 ($500,000 if married), and that any gain above that, captital gains tax has to be paid. And it is not possible to roll-over, unless one does a 1031 exchange.
Any insight as to which is current and correct much appreciated.
Comments
"I've also been told that, instead, on any gain there is a tax exemption on the amount of $250,000 ($500,000 if married), and that any gain above that, captital gains tax has to be paid. And it is not possible to roll-over, unless one does a 1031 exchange".
This paragraph you wrote sounds right except that I don't think you can combine the two, but I don't know for sure.
The 1031 is a "like kind" exchange. Check out the IRS publication on like kind exchanges. The timetable for the exchange is pretty short.
Posted by: guest at October 24, 2007 4:42 PM
do you live in this property or is it a rental? or both? 1031 is for rental to rental.
Posted by: buckygirl23 at October 24, 2007 5:27 PM
1031 is not for rentals. But you really do need to read the rules and/or consult a tax specialist so you are sure to take the right steps at the right time (starting w/ before you buy and sell).
Posted by: guest at October 24, 2007 5:43 PM
The tax exemption applies if the home was your primary residence for more than 2 years.
Posted by: rh at October 24, 2007 5:55 PM
You pay taxes (15% federal, 12% state) on the difference between the sale amount of the house and your basis. Your basis is the original cost plus 250,000 (or 500K if married) plus any money you've spent improving the place over the years.
As far as I understand it, the rolling over doesn't apply anymore, except if it's a rental property perhaps? But then the primary residence exemption wouldn't apply
Posted by: guest at October 24, 2007 8:38 PM
what do you mean 1031 is not for rental to rental ? a 1031 exchange is when you take a property that has been listed as a rental on your taxes for 2 of the last 5 years...sell it.. and use the money that you make to reinvest in another rental property within 6 months (90 days to identify, 90 days to close) .. this allows you a tax shelter on the "profit" you made from the sale.
Posted by: buckygirl23 at October 24, 2007 10:01 PM
You can write off your renovations over the time you owned the house, and write off appliances you purchased that come with the house, too.
Posted by: guest at October 24, 2007 10:11 PM
oooh, it's all so complicated, who would have thought it. i would certainly never knock owning my house and the appreciation. On paper it's great, but it's really not easy to figure out how to move on and tax implications are harsh.
could be a cautionary tale - i bought my house 12 yrs ago (go figure on the price) but it's not likey to be worth me selling....after tax, i think i'll be lucky to afford an apt in the same area.
for those who asked, house is 50% priamry residence, 50% rental.
Posted by: jolly at October 25, 2007 1:55 AM
Check with an accountant but I believe that the depreciation on the rented portion of your space space is waived if you occupy (or don't rent) that space for 2 (maybe 3) years.
Having a good accountant is right up there with having a roof that doesn't leak.
Posted by: Johnny at October 25, 2007 9:20 AM
even if its 50/50 you can still do a 1031 IF you have been reporting your rental income in a schedule E on your taxes for the past 2 years AND you buy a place that has rental income (ie a two famil) or you rent your new place out.. the weird thing about a 1031 is that there is no law that states how long you have to rent your new rental property.. as stated above speak to your accountant. you can save a lot of money with a 1031 for sure , good luck
Posted by: buckygirl23 at October 25, 2007 10:07 AM
Has anybody here sold a place that appreciated substantially more than the 250,000/500,000 tax exemption and happen to know when the capital gains tax has to be paid? (I'm not talking 1031 here - just regular residential (no rentals) sale.)
Do you have to pay it in the quarter you sell, or can you pay it by the next Apr. 15? And, if you do pay it on Apr. 15, do you owe penalty if you didn't pay by Dec 31 90% of what your taxes were last year?
Posted by: guest at October 25, 2007 3:48 PM
My accountant said the following April 15 after the year of sale
Posted by: guest at October 25, 2007 11:52 PM
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