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Bought Last Year |
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Bought our home one year ago and now want to sell. Will we have to pay capital gains tax if we don't purchase another home? |
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Congratulations on expecting to make a profit after just one year. In many parts of the country, people tell me prices are falling, and by the time you subtract the costs of selling, what you have is a loss.
Buying a replacement home no longer makes any difference in tax treatment. The general rule is that you can use the homesellers exclusion from tax (up to half a million profit for a couple filing jointly) if you've owned and occupied the place as your main residence for at least two of the five years before the sale.
But if your move is dictated by some unexpected happening -- job transfer, death in the family, divorce, birth of twins, doctor's orders, for example, you might qualify to use part of the exclusion. If you'd been there one year, half of the required time, for example, you might take half of the exclusion, tax-free profit of up to $125,000 for a single owner, or $250,000 for a couple.
If you don't qualify for the exception, on consolation is that your gain would be long-term, taxed at no more than 15 percent federal. |
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Edith
Originally published on September 7, 2007 |
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