Capital gains taxes on sale of real estate

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scsiguru
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Joined: Sun Jan 23, 2011 1:44 pm

Capital gains taxes on sale of real estate

Post by scsiguru »

My wife and I are retired and thinking about selling our primary residence and then traveling for a year (maybe an RV) or so before buying again. We have been in our home for over 11 years and the selling price would be much less than $500K.

Anyway, my BiL is adamant that we will have to pay capital gains taxes. I told him no we don't and showed him the Investopedia link below. I know there are some circumstances where capital gains taxes are applicable but for my situation that's not the case.

He said he knows an accountant that told him capital gains taxes must be paid for real estate transactions involving primary residences. Is there any merit in this?

https://www.investopedia.com/ask/answer ... mesale.asp
AnnetteLouisan
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Location: New York, NY

Re: Capital gains taxes on sale of real estate

Post by AnnetteLouisan »

Keep in mind some states like NY have state and local capital gains taxes on real estate, so you may want to check your local rules as well.
Last edited by AnnetteLouisan on Tue Oct 12, 2021 5:50 pm, edited 1 time in total.
Topic Author
scsiguru
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Re: Capital gains taxes on sale of real estate

Post by scsiguru »

AnnetteLouisan wrote: Tue Oct 12, 2021 3:02 pm Keep in mind some states like NY have state and local capital gains taxes on real estate, so you may want to check your lical rules as well.
My state only charges capital gains tax on land sales by nonresidents.
zie
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Re: Capital gains taxes on sale of real estate

Post by zie »

scsiguru wrote: Tue Oct 12, 2021 2:59 pm traveling for a year (maybe an RV) or so before buying again.
If you plan on a mortgage for the new home purchase in a year or so, it can be quite to very difficult to find a mortgage lender once retired and not having verifiable IRS tax income of sufficient amounts.

Cap gains in general are 100% taxable on real estate also, but there are exceptions, and primary homes you lived in for a while are one of the big exceptions. I'm not up to date on all the latest exceptions, plus your state/county probably has their own rules around real estate taxes and their own unique exceptions.

So for planning purposes the lazy answer would be, assume all cap gains taxes will apply, and then hope for a pleasant surprise, if you can fit into an exception. Otherwise I'd recommend reaching out to a tax professional in your state.
5280Tim
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Re: Capital gains taxes on sale of real estate

Post by 5280Tim »

scsiguru wrote: Tue Oct 12, 2021 2:59 pm My wife and I are retired and thinking about selling our primary residence and then traveling for a year (maybe an RV) or so before buying again. We have been in our home for over 11 years and the selling price would be much less than $500K.

Anyway, my BiL is adamant that we will have to pay capital gains taxes. I told him no we don't and showed him the Investopedia link below. I know there are some circumstances where capital gains taxes are applicable but for my situation that's not the case.

He said he knows an accountant that told him capital gains taxes must be paid for real estate transactions involving primary residences. Is there any merit in this?

https://www.investopedia.com/ask/answer ... mesale.asp
As others have said, it might be taxable from a state/local level. Primary residence capital gains are exempt federally up to $250k single, $500k mfj assuming you’ve lived there at least 2 of the last 5 years.
https://www.irs.gov/taxtopics/tc701
Last edited by 5280Tim on Tue Oct 12, 2021 3:49 pm, edited 1 time in total.
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goingup
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Re: Capital gains taxes on sale of real estate

Post by goingup »

Likely you’ll qualify for the $250K (single) or $500K (joint filer) capital gains exemption. Read the IRS pub to make sure you meet the eligibility test.
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cchrissyy
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Re: Capital gains taxes on sale of real estate

Post by cchrissyy »

the way you have written the question, you are obviously correct and he would only be right if certain exceptions applied, like if your house sold for a much higher price, or if you had not really been living there, or if your state tax laws are different.

i don't think you have anything to worry about. maybe find your own CPA to ask, or maybe get him to explain in more detail why he's saying this?
comfortable being all stock until age 40, now working towards 60-20-20 us-intl-bond
Hockey10
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Re: Capital gains taxes on sale of real estate

Post by Hockey10 »

Your only mistake was discussing finances with in-laws.
Topic Author
scsiguru
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Re: Capital gains taxes on sale of real estate

Post by scsiguru »

Hockey10 wrote: Tue Oct 12, 2021 4:21 pm Your only mistake was discussing finances with in-laws.
LOL! Never discussed it with him...just mentioned we thought about selling and the first thing he pipes up with is that "...you'll have to pay capital gains tax"
Topic Author
scsiguru
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Re: Capital gains taxes on sale of real estate

Post by scsiguru »

Thanks everyone for your replies!
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