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Selling Own Home |
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Edith: I purchased a house last year and want to sell now. I know that one has to live in a house for two years to avoid capital gains taxes, but I've heard that if I sell in less than a year, the profits will be taxed as ordinary income. Should I wait? |
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There are exceptions, but in general if you sell your own home after less than one year, any profit is taxed as ordinary income. After one year, it's taxed at favorable long-term capital gains rates. After two years you can use the homesellers exclusion on your gain. Don't forget, when you figure your gain, that you can subtract from the sale price not only original cost, but also anything spent on permanent improvements. You can also subtract real estate commissions, and legal costs of buying and selling. Taking those into consideration, I can't imagine you'd have much profit to worry about after less than one year. |
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Edith
Originally published on January 30, 2005 |
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