Capital Gains on House LESS than 1 year

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62caster
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Capital Gains on House LESS than 1 year

Post by 62caster »

Does anybody have any experience with capital gains tax on a home owned less than 1 yr? My wife and I are relocating to get into something more suitable for our family after our 4th child was born this year and since I am now permanently working from home. I am being told I will need to pay short term gains tax on the 80k profit we will make.

Does anybody know if we qualify for any sort of exception?

Also, if not, can I remove realtor fees, etc. from the overall amount or is it paid on gross proceeds?
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CAsage
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Re: Capital Gains on House LESS than 1 year

Post by CAsage »

Generally the short term gains (and you are Darn Lucky if after only one year, there are any), are net proceeds (sale minus broker, escrow, title, anything you paid that showed up on the escrow except taxes and insurance, in general) minus total cost (purchase price plus any escrow costs). Can you stick it out to make the 2 year clock on purchase?
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62caster
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Re: Capital Gains on House LESS than 1 year

Post by 62caster »

CAsage wrote: Thu Oct 22, 2020 6:53 pm Generally the short term gains (and you are Darn Lucky if after only one year, there are any), are net proceeds (sale minus broker, escrow, title, anything you paid that showed up on the escrow except taxes and insurance, in general) minus total cost (purchase price plus any escrow costs). Can you stick it out to make the 2 year clock on purchase?
Well, the house is scheduled to close next week :happy
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Quirkz
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Re: Capital Gains on House LESS than 1 year

Post by Quirkz »

Have you made any repairs or improvements to the house? I think those are also deductible from the gains.
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62caster
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Re: Capital Gains on House LESS than 1 year

Post by 62caster »

Quirkz wrote: Thu Oct 22, 2020 6:57 pm Have you made any repairs or improvements to the house? I think those are also deductible from the gains.
Yes, we spent about 8k in upgrades/repairs.
Gill
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Re: Capital Gains on House LESS than 1 year

Post by Gill »

62caster wrote: Thu Oct 22, 2020 6:59 pm
Quirkz wrote: Thu Oct 22, 2020 6:57 pm Have you made any repairs or improvements to the house? I think those are also deductible from the gains.
Yes, we spent about 8k in upgrades/repairs.
Repairs cannot be included, only capital improvements.
Gill
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BogleDan
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Re: Capital Gains on House LESS than 1 year

Post by BogleDan »

Work with your CPA to determine the appropriate basis for your current house. (Purchase price + certain closing costs + improvements you have made). Your gain upon selling will be (Sales price - certain closing costs). And yes, that includes real estate agent commissions.

It will be a short term gain and you will be taxed at your normal income rate. There aren't any exceptions, no. But don't let the tax bother you too much -- that's a great gain regardless!
MarkNYC
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Re: Capital Gains on House LESS than 1 year

Post by MarkNYC »

BogleDan wrote: Thu Oct 22, 2020 8:21 pm It will be a short term gain and you will be taxed at your normal income rate. There aren't any exceptions, no.
There are exceptions. When the taxpayer does not meet the 2-year ownership and use requirement on the sale of a principal residence, a partial exclusion of the gain is available if the primary reason for the sale is a change in place of employment, health reasons, or certain unforeseen circumstances. The IRS has provided a list of some events that will and won't qualify for the "unforeseen circumstances" exception. With the information provided, it seems unlikely the OP could make a convincing case that would allow for a partial exclusion.
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62caster
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Re: Capital Gains on House LESS than 1 year

Post by 62caster »

MarkNYC wrote: Thu Oct 22, 2020 10:16 pm
BogleDan wrote: Thu Oct 22, 2020 8:21 pm It will be a short term gain and you will be taxed at your normal income rate. There aren't any exceptions, no.
There are exceptions. When the taxpayer does not meet the 2-year ownership and use requirement on the sale of a principal residence, a partial exclusion of the gain is available if the primary reason for the sale is a change in place of employment, health reasons, or certain unforeseen circumstances. The IRS has provided a list of some events that will and won't qualify for the "unforeseen circumstances" exception. With the information provided, it seems unlikely the OP could make a convincing case that would allow for a partial exclusion.
Thanks - I was reading up on that but couldn’t figure out if the baby or the work from home situation was qualify.
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