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Does anyone know how I am to be taxed on a home sold?
Posted on 1/11/22 at 11:49 pm
Posted on 1/11/22 at 11:49 pm
We recently sold a home that we lived in for 20 years. I read that if filing single you are allowed up to 250k and of jointly you are exempt for 500k. Can anyone verify I am reading this correctly?
9
Posted on 1/11/22 at 11:51 pm to shoelessjoe
That’s correct if it is your primary residence.
Posted on 1/11/22 at 11:51 pm to shoelessjoe
Just be safe and give it all to uncle Sam.
Posted on 1/11/22 at 11:52 pm to Irregardless
quote:
That’s correct if it is your primary residence.
Yes it was our primary home. Thanks
Posted on 1/11/22 at 11:53 pm to shoelessjoe
1. Money Board
2. Don’t know how much you made off sale but you shouldn’t be taxed on it. I sold 2 houses in 2021, and had lived in both of them 2 out of the past 5 years. Looked it up and confirmed with my tax guy (FIL), some 2 in 5 year rule states no income or capital gains tax paid on sale of own home.
2. Don’t know how much you made off sale but you shouldn’t be taxed on it. I sold 2 houses in 2021, and had lived in both of them 2 out of the past 5 years. Looked it up and confirmed with my tax guy (FIL), some 2 in 5 year rule states no income or capital gains tax paid on sale of own home.
Posted on 1/11/22 at 11:54 pm to shoelessjoe
That was right like 5 years ago when I studied for the CPA exam.
Also you can get some other deduction up to another $500k for interest on the mortgage or something like that. It's been a while, I'm in audit, not tax.
Also you can get some other deduction up to another $500k for interest on the mortgage or something like that. It's been a while, I'm in audit, not tax.
Posted on 1/11/22 at 11:56 pm to Who_Dat_Tiger
2/5 is just to test if you can consider it primary residence.
You can deduct 500k gain for mfj
You can deduct 500k gain for mfj
Posted on 1/12/22 at 1:07 am to shoelessjoe
1st step is to determine your gain which is the selling price minus your basis and selling expenses. Your basis is your purchase price of the property plus any improvements made over the time you owned it unless it was inherited or gifted to you. An inherited asset's basis is whatever it was worth the date of the decedent's death. A gifted asset's basis is whatever the giver paid for it.
2nd step is to determine if the gain is greater than $250k or $500k if married. Any gain over that applicable threshold is taxed as a long-term capital gain.
Most people don't pay any tax on the sale of their home, but I saw a few this past year on homes that were gifted to the seller which would cause them to have a low basis. The sky-rocketing real estate prices have also made some home sales result in gains >$500k.
2nd step is to determine if the gain is greater than $250k or $500k if married. Any gain over that applicable threshold is taxed as a long-term capital gain.
Most people don't pay any tax on the sale of their home, but I saw a few this past year on homes that were gifted to the seller which would cause them to have a low basis. The sky-rocketing real estate prices have also made some home sales result in gains >$500k.
Posted on 1/12/22 at 3:10 am to shoelessjoe
Posted on 1/12/22 at 3:37 am to millsrat
quote:
Your basis is your purchase price of the property plus any improvements made over the time you owned it
This is a very important bit that most people don't know partly because the gains were smaller in the past and the few that met the threshold generally had the type of income to have a tax advisor. It is important to keep a file documenting all the improvement costs during the time you own a home, which can add up to a substantial amount over the years.
Also, note that some settlement fees and closing costs are also part of your adjusted basis. Improvements are part of the adjusted basis but "repairs" generally are not. Repairs as part of a larger renovation are usually part of your adjusted basis. For example, if you repair small section of a leaky roof or a small section of flooring that is generally a repair that is not part of the basis but if you replace the roof or replace a significant amount of the flooring it usually would be part of the basis.
Posted on 1/12/22 at 6:00 am to Who_Dat_Tiger
quote:
Don’t know how much you made off sale but you shouldn’t be taxed on it. I sold 2 houses in 2021, and had lived in both of them 2 out of the past 5 years. Looked it up and confirmed with my tax guy (FIL), some 2 in 5 year rule states no income or capital gains tax paid on sale of own home.
So you won't have to pay taxes on either sale, even when you sold them during the same year?
I'm pretty much in the same boat due to getting married and both of us selling our houses in '21.
Posted on 1/12/22 at 6:29 am to Who_Dat_Tiger
Eligibility Step 4—Look-Back
Determine whether you meet the look-back require- ment. If you didn't sell another home during the 2-year period before the date of sale (or, if you did sell another home during this period, but didn't take an exclusion of the gain earned from it), you meet the look-back requirement. You may take the exclusion only once during a 2-year period.
Determine whether you meet the look-back require- ment. If you didn't sell another home during the 2-year period before the date of sale (or, if you did sell another home during this period, but didn't take an exclusion of the gain earned from it), you meet the look-back requirement. You may take the exclusion only once during a 2-year period.
Posted on 1/12/22 at 6:31 am to millsrat
quote:
1st step is to determine your gain which is the selling price minus your basis and selling expenses. Your basis is your purchase price of the property plus any improvements made over the time you owned it unless it was inherited or gifted to you. An inherited asset's basis is whatever it was worth the date of the decedent's death. A gifted asset's basis is whatever the giver paid for it.
2nd step is to determine if the gain is greater than $250k or $500k if married. Any gain over that applicable threshold is taxed as a long-term capital gain.
Most people don't pay any tax on the sale of their home, but I saw a few this past year on homes that were gifted to the seller which would cause them to have a low basis. The sky-rocketing real estate prices have also made some home sales result in gains >$500k.
Tax CPA here. This.
Also, most of Bidens proposed changes to the tax code involve getting rid of the step-up in basis for inheritances. That means for capital gains calculations inheritances would be treated like gifts which is likely to hurt those inheriting a home. Plan accordingly.
Posted on 1/12/22 at 6:31 am to indytiger
Unlike the ownership requirement, each spouse must meet the residence requirement indi- vidually for a married couple filing jointly to get the full ex- clusion.
Posted on 1/12/22 at 6:32 am to shoelessjoe
That is correct, would only impact you if less than 2 years.
Posted on 1/12/22 at 6:57 am to Curdoglsu
quote:
Unlike the ownership requirement, each spouse must meet the residence requirement indi- vidually for a married couple filing jointly to get the full ex- clusion.
Meaning, if I lived in my house full time until selling it, and she lived in her house full time until selling it, we can file jointly and be excluded from the taxes?
Posted on 1/12/22 at 9:27 am to indytiger
Correct unless you or your spouse have used this exclusion once in the past 2 years.
Posted on 1/12/22 at 9:30 am to PNW_TigerSaint
quote:
involve getting rid of the step-up in basis for inheritances.
Which would be an absolute nightmare for record keeping - that might be the idea - they better hire a lot more IRS agents.
Posted on 1/12/22 at 10:35 am to PNW_TigerSaint
quote:
Tax CPA here. This.
Also, most of Bidens proposed changes to the tax code involve getting rid of the step-up in basis for inheritances. That means for capital gains calculations inheritances would be treated like gifts which is likely to hurt those inheriting a home. Plan accordingly.
Would this be applicable to a sale in 2021?
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