Home Buying in San Francisco>Question Details

crystal, Home Owner in Hayward, CA

Tax consequence for selling house

Asked by crystal, Hayward, CA Thu May 30, 2013

We are considering to sell our primary house bought in 2011, and upgrade to buy a new house.
We only live this house for 2.5 years, we are wondering if the gain will be taxted as capital gain. How much is the tax rate?
People said we need to live in for 5 years.
Any advice?

Thanks very much!

Help the community by answering this question:


Thanks Leopold, Joe, Steve, George and Randall, for your time and help!

We are glad to have a good community full of Real Estate Expert like you!

We would consult our CPA before making final decision.

Have a good night!
0 votes Thank Flag Link Thu May 30, 2013
You should speak to a tax professional. They should be familiar with the laws and rules.
0 votes Thank Flag Link Thu May 30, 2013
Hi Crystal,
This is a great questions and does in fact come up a lot of the time. There are "General Rules" such as the capital gains exemption: $250k (Single) and up to $500k for individuals that are married or file a joint return. With that being said it's very important to keep in mind the the IRS code is a very complicated matter and can change depending on each individuals scenario. Simple rules are okay to follow but to ensure exactly the what will happen when you in fact decide to sell, I would recommend speaking with and Tax Advisor (E.A., Accountant, Etc). The easiest way is to call the individual that prepared your prior years tax return. I say this because they will already have your paperwork on file and will know your specific situation. I would hate to see you get told something and have a different outcome. Although it's easy to give advice as a Real Estate agent on this topic we also must be very careful because everyone's situation is different. If you don't have someone to call I would be happy to give you a few names as well.

0 votes Thank Flag Link Thu May 30, 2013
Hi Crystal,

I agree with Joseph; and if you actually have a $250K+ gain from a 2011 purchase you would be one of the very lucky – and few!

To address your Capital Gains tax question, if you live in CA the MAXIMUM combined Fed/State Cap gains tax rate can be as high as 33%, which is based on your income. Follow Cindy's recommendation to see a tax advisor! Certainly, you’ll need some idea of what your home will sell for (please do not use Zillow for this if you want accuracy); therefore, if you would like to know the current market value of your home just contact me offline and I will perform a Comparative Market Analysis for you - no charge of course!

0 votes Thank Flag Link Thu May 30, 2013
As long as you used the property for at least 24 consecutive months during the 2 1/2 years of ownership as your PRIMARY Residence (the address on your driver's license where you receive mail, etc.) you can exclude up to $250,000.00 for single filers and $500,000.00 for joint filers. No offense to Leoppold's answer but he is going in to directions that either are not applicable or should only be discussed with your tax advisor. Good luck on the sale.

0 votes Thank Flag Link Thu May 30, 2013
This is the issue that concerns you:

"IRS Topic 701 - Sale of Your Home

A home is often a person’s most valuable capital asset. If you have a gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may exclude up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic 409 covers general capital gain and loss information.

In general, to qualify for the exclusion, you must meet both the ownership test and the use test. You are eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. Generally, you are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Refer to Publication 523 for the complete eligibility requirements, limitations on the exclusion amount, and exceptions to the two-year rule.

If you receive an informational income reporting document such as Form 1099-S (PDF), Proceeds From Real Estate Transactions, you must report the sale of the home, even if the gain from the sale is excludable. Additionally, you must report the sale of the home if you cannot exclude all of your capital gain from income. Use Form 1040, Schedule D (PDF), Capital Gains and Losses, and Form 8949 (PDF), Sales and Other Dispositions of Capital Assets, when required to report the home sale. Refer to Publication 523 for the rules on reporting your sale on your income tax return.

If you or your spouse are on qualified official extended duty in the Uniformed Services, the Foreign Service, or the intelligence community, you may elect to suspend the five-year test period for up to 10 years. You are on qualified official extended duty if, for more than 90 days or for an indefinite period, you are:
•At a duty station that is at least 50 miles from your main home, or
•Residing under government orders in government housing.

If you sold your home under a contract that provides for all or part of the selling price to be paid in a later year, you made an "installment sale." If you have an installment sale, report the sale under the installment method unless you elect out. Refer to Topic 705, Installment Sales, for more information. "

Single Agency Broker 00849905
400 Montgomery 505
San Francisco CA 94104
Office: 415.781.3000
0 votes Thank Flag Link Thu May 30, 2013
Thanks, Cindy! Have a great day!
0 votes Thank Flag Link Thu May 30, 2013
This really is a question for your tax advisor...
0 votes Thank Flag Link Thu May 30, 2013
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