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Tax on Selling |
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I am thinking about selling my house. My sister and brother-in-law sold their house about a year ago. They made an $80,000 profit on the sale. They recently purchased another home. My sister said that the reason why they bought a second home because they were advised that in order to avoid paying taxes on the money, they would have to either use the money to buy another home, or roll the money into an I.R.A. I thought you did not have to pay Capital Gains taxes on a profit that you make from the sale of your home if it is less than $ 500,000 and you are married, or $250,000 if you are single. |
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You are right and your sister and brother-in-law are wrong. They're thinking about an old law that hasn't been in effect for a long time, and they've been getting some wacky tax advice.
If you've owned and occupied your home as your principal residence for at least two of the five years before you sell it, you can indeed use the homesellers exclusion, taking the profits you mention free from federal capital gains tax. It no longer matters whether you buy another house. And IRA never entered into it even in the old days.
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Edith
Originally published on March 9, 2008 |
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