Question Details

Rosendo Lopez, Home Seller in Houston, TX

Do I have to pay taxes on the profit I make when I sell my home?

Asked by Rosendo Lopez, Houston, TX Sat Aug 2, 2008

It will be for less than $100,000. When I sell it.

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Answers

4
Ray is right, except you will need to account for someof the expenses you incurred while selling the home as well as making sure the capital improvements are allowable improvements.

In a broad sense, you do have $250,000 exlusion form capital gains when selling your home, so netting $100,000 is well within that limit. This is only general guideline.

But everything is in the details, especially with IRS. I will consult an accountant with all the details to make sure you don't have to pay tax on the gain.

Sylvia
0 votes Thank Flag Link Mon Aug 4, 2008
Sylvia Barry,…, Real Estate Pro in Marin County, CA
MVP'08
Contact
Here is more info for you and others who may have a similar question.

The federal capital gains tax exemption allows for an exemption of $250,000 for a single person and $500,000 for a couple. The rules are as follows:
You must live in the home as your primary residence for 2 out of the last 5 years.
The purchase price of your home, including some transaction costs, is deducted from your sale price less some transaction costs. You then deduct capital improvements from this amount. If it is less than the exemption amount that applies, then you have no capital gains tax to pay. If it is greater, then you have to pay capital gains tax on the amount above the exemption amount.

Example:
Buy a property in 2005 for $300,000 including transaction costs
Sell the property for $700,000 in 2008, including transaction costs
While you owed it, you replaced the roof for $30,000

Calculation:
Sale $700,000
Less Purchase $300,000
Gross $400,000
Less Capital imp. $30,000
Capital gain of $370,000

Exemption of $250,000 (assuming it was your home that you lived in and that you are single)
Taxable capital gain $120,000

I hope this helps you and other with similar questions. Contact me if you need a referral for an accountant.

Best,
Ray
Web Reference: http://www.charityar.com
0 votes Thank Flag Link Sun Aug 3, 2008
Rosendo
You need to speak with a CPA that is familiar with your personal financial situation. Your are taxed on the gain from the sale (not the profit). Based on your income level and other financial aspects, you may not have to pay anything.

Ask your tax professional.
0 votes Thank Flag Link Sun Aug 3, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
You will pay no capital gains tax as long as you have lived in your home for two years. Please let me know if you would be interested in FL investment properties.
0 votes Thank Flag Link Sat Aug 2, 2008
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