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Tax On Selling |
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Dear Edith: I have a question I don't recall seeing previously in one of your columns.
We own a primary residence an investment property out of state (which we rent out.) We plan to sell our primary residence and buy either a condo or patio home in this area. We plan to sell the investment property at the same time and use the profit from that, along with the profit from our current primary home, to pay for the new primary home. My question is this. Given we are using profits from both homes to put into one primary home, how are we assessed for capital gains and/or what are the tax implications? |
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You can’t have been reading the column very long, because so many questions like yours come in that I have to repeat the information often, at the risk of boring those who read every week.
On the sale of your own home, assuming you've owned and occupied it for at least two of the five years before you sell, the two of you can have up to $500,000 profit free of federal capital gains tax. This is true whether or not you buy another residence.
On the sale of your rental property, no special tax treatment applies, as you do not intend to reinvest in income real estate. Assuming you've owned it for at least 12 months, your profit will qualify for favorable capital gains treatment, with some adjustment for depreciation you claimed or could have claimed while it was rented
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Edith
Originally published on December 6, 2006 |
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