Capital gains on home sale

Do you need the cash or can you 1031 that money into another deal? Or a commercial deal even

800k profit on a starter home? Got damn

Starter home in DC, LA or NYC maybe

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make around $800K

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Over what you paid (basis). Assuming yes but figure worth clarifying

You wont owe much. You can exclude 500k even if converted to a rental if meet 2 of 5 year test. Just have to recapture deprecation.

Was a cpa for 5 years and hated it. No longer one so a little rusty but pretty sure I'm right. Actually, you make not quite make the cutoff, its close.

If you've lived in the home 2 of the last 5 years, then I believe you can sell tax free gain up to $250k per person or $500k if married. Sounds like you'd have to pay Cap Gains on the $300k over the $500k tax free?

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WTF kind of “starter home” has a capital gains of $800k, AND is a rental property for the last 3 years!? Assuming this is a modest ~50% increase, you have $1.6M “starter home” that’s now worth $2.4M….and people have been renting it since 2019?

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It's a condo we bought for $500K in 2014 and is now worth ~$1.3M. The one next door to ours sold for $1.29M just last week.

It was our primary home from 2014 to 2019 and we lived in it for that entire 5-year period. We moved out in Sep 2019 and bought a SFH which is now our primary home. We have been renting the condo since Sep 2019.

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It's a condo we bought for $500K in 2014 and is now worth ~$1.3M. The one next door to ours sold for $1.29M just last week.

It was our primary home from 2014 to 2019 and we lived in it for that entire 5-year period. We moved out in Sep 2019

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This echoes the Tigerland and Bamaswallows posts.

Based on what you're saying, if you close before September, the condo would check-the-box as your full time residence for 2 of the last 5 years. Proceeds from the sale would qualify for a $500K tax exemption.

Cost of the sale (brokerage fee, repairs, etc) will affect your bottomline. Assuming those apply, your LTCG tax exposure should come in south of $235K. Given your total income, I'd assume that portion would be subject to a 23.8% tax rate. (LTCG > $500K income + NIIT). So total federal liability on $735K would run about 7.5%. Depending on your state, you'll have some exposure there as well.

The 1031 Exchange is a nice alternative, but keep in mind you'd be reinvesting in a sector which may be at a peak.

If it were me in this environment, I'd take the cash and move it to the market.

Oh, and congrats on the nice windfall!

good question, doubt it though

You can do a partial 1031 and keep some boot or funds out of the new purchase. This boot would be capital gains and I would assume the $500,000 limit would apply to that unless there is a specific law applying to this. You’ll need a third party to complete the exchange anyway so I’d ask them if they have seen this done before.