I agree with Deb, there is a one time exclusion in MA for a single person for up to 250k in equity and 2 exclusions for married couples. Brecht, there would be no need for an exclusion after the two year mark is up, thats the point your in the clear.

And I only mentioned the 1031 exchange, because he didnt specify if this was his primary home...I never assume anything on here =)....thats why I advised him to check with his financial advisor on whether or not this could be applicable.

oops, Brecht is right. If you need to sell now, and you take a loss, there is no tax. But if you wait until you have lived there for 2 years, when the market recovers you won't pay any tax.

That $250,000 is only true when you have lived in a residence for at least 2 out the last 5 years. So were there gain which there isn't in this case it would be taxable.

Even if you sell for a profit, as long as this was your primary residence, you won't owe anything. From Bankrate.com: "good tax news for home sellers: Most of them won't owe the Internal Revenue Service a single dime.When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes. "

Capital gains is tax on your GAIN, you don't have any gains. No gains no tax.

If you have no gains you wouldn't have anything to exchange - a 1031 exchange is for investment property and capital equipment only, never for a personal residence.

To protect gains in a personal residence one would look to a Deferred Sales Trust or some such vehicle.

The long and short of it is if you make no money you pay no taxes.

What you might be talking about is when you sell short you can be responsible for taxes on the amount that the lender forgives. That too is being done away with.

Hi Keith and AR,

good for you both to know, they did away with prepayment penalties in MA years ago.

AR,
I would not worry about capital gains. I"d check to see if there is a prepayment penalty in your mortgage. Now THAT could be painful.
Keith

Hi AR,

if you bought 2 years ago, you probably wont make a profit on the sale. Capital gains taxes is applicable when there is profit. On the off chance there is a profit, you should look into a 1031 exchange if you are thinking of buying something else upon the sale of your condo. Consult your tax advisor or financial advisor on how this would work for you.

AR,

I'm a Realtor, not an accountant, but I have attached a link that may answer your question. If you sell for less than you paid, I don't believe you pay since you didn't have a gain. It would be best to talk with an accountant for details.


Hope this was helpful.

Julie Duncan
REMAX Landmark