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Tax Question-Selling Your Home


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#1 of 12 Johnny Angell

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Posted February 21 2006 - 04:10 AM

So Feb of 2005 we sold our home in LR and moved to FL which was required by my wife's employer so she could keep her job. We had lived in the AR house for probably 8-9 years.

Now we are looking at the prospect of having to do it again. Sell our home and move to stay employed. I just discovered that the $500,000 exclusion for married couples only applies if you stay in the home for two years, which if this happens soon, we won't.

I was over on the Turbo Tax site and found this information:
Quote:
If you needed to sell your home because of a change of employment or a change of health or because of other unforeseen circumstances, you may still qualify for a partial exclusion.

Anyone know what partial means? This would really suck if we get nailed on selling our home, when employment circumstances force us to sell it.

BTW, anyone know how good Turbo Tax is on handling moving expenses incurred due to an employer required move? Which level of TT would I have to buy? I haven't found any reference to this yet.

Anyone run across a good tax forum?
Johnny
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#2 of 12 SethH

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Posted February 21 2006 - 04:42 AM

Here's my understanding, but please verify this somewhere else first.

It's based on the length of your stay in the house. Figure our how many days you've lived in your house. Divide that number by 730 and then multiply the result by 500,000 and that's your max exclusion.

#3 of 12 Johnny Angell

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Posted February 21 2006 - 04:59 AM

Quote:
multiply the result by 500,000 and that's your max exclusion.
Is the 500,000 a constant, no matter what the house sells for? Or what we buy a new house for?

Since we've lived in the house about one year, it would be 730/365 * 500,000 which ends up to be 250,000.
Johnny
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#4 of 12 Dennis Nicholls

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Posted February 21 2006 - 07:49 AM

The $500,000 exclusion applies to capital gains from the sale of a primary residence. Did your house in Florida really gain that much in sales price over the last year or so? Posted Image
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#5 of 12 Johnny Angell

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Posted February 21 2006 - 08:36 AM

Quote:
Did your house in Florida really gain that much in sales price over the last year or so?
I wish.:b I was concerned that we'd have to pay taxes if we sold it after less than two years.
Johnny
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#6 of 12 Dennis Nicholls

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Posted February 21 2006 - 11:26 AM

Go to the IRS web site www.irs.gov and download IRS Publication #523 "Selling Your Home". All your questions will be answered.....

I've been reading this myself. I'm single, so I only get to exclude $250,000 of capital gains. Isn't that interesting how the government has determined that single people only have to pay half as much for a house as a married couple? Posted Image

You think you have problems...I bought my place in 1981 for $110K and it's going on the market for something like $650K. Needless to say I am learning much about this capital gains treatment. I purchased several books from Amazon about this very topic.
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#7 of 12 Johnny Angell

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Posted February 21 2006 - 12:49 PM

Quote:
Isn't that interesting how the government has determined that single people only have to pay half as much for a house as a married couple?
Well obviously, you only need half as much house[duckingandrunning]

I agree that it sucks.
Johnny
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But a family cat is not replaceable like a wornout coat or a set of tires. Each new kitten becomes its own cat, and none is repeated. I am four cats old, measuring out my life in friends that have succeeded but not replaced one another.--Irving Townsend


#8 of 12 Jason-D

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Posted February 21 2006 - 01:44 PM

Dennis,

I believe that you can avoid paying capital gains on the entire amount of your house's selling price provided that you reinvest the money in your new primary residence. Are there any $650,000 houses in Idaho?

#9 of 12 DaveF

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Posted February 21 2006 - 03:10 PM

Quote:
re there any $650,000 houses in Idaho?
$650k will buy Idaho! Posted Image

Sorry, got nothing useful to add.

Well, I suppose Dennis could marry for the capital gains break. Ahem...

And Johnny, for your somewhat-complex situation, maybe a professional accountant would be worth the cost? Turbo Tax is cheaper, but sometimes a professional can pay for themselves both in total savings and peace of mind that the taxes were done correctly.

#10 of 12 Dennis Nicholls

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Posted February 21 2006 - 09:05 PM

Jason,

That law was repealed during the Clinton administration, although the word hasn't gotten around. The general rule now is that you are liable to pay taxes on the entire amount of capital gains on the sale of a house: however, you may exclude $250K single/$500K married on the sale of a "primary residence" as defined in the tax code. Most states follow this as well. I'll pay 15% federal and 9% California tax on any capital gains I can't exclude or otherwise avoid (e.g. updated basis from improvements).

Dave,

That wouldn't work, as SHE would have had to live in the house for at least two years for us to get the married exemption as a primary residence.
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#11 of 12 DaveF

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Posted February 22 2006 - 12:34 AM

Quote:
That wouldn't work, as SHE would have had to live in the house for at least two years for us to get the married exemption as a primary residence.
Hmmm... perhaps I'd better rethink my recent wedding plans...

Well, it's good to know that such an obvious tax loophole was considered and closed (though I do dislike the two exemption classes).

#12 of 12 Johnny Angell

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Posted February 22 2006 - 07:25 AM

There is something inherently wrong with taxing the proceeds from your home, particulary when its really been your home and not just an investment. There should be some adjustment for people who have lived in their homes for more than, say, 10 years.

The tax code should encourage long-time home ownership. And I say this as a Democrat, not a tax-cutting Republican.

I also think that if you are moving because a job requires you to, there should be no prorating of the 500K exemption.
Johnny
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But a family cat is not replaceable like a wornout coat or a set of tires. Each new kitten becomes its own cat, and none is repeated. I am four cats old, measuring out my life in friends that have succeeded but not replaced one another.--Irving Townsend



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