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Trulia Boston, Home Buyer in Boston, MA

Quick and easy tax guide?

Asked by Trulia Boston, Boston, MA Tue Feb 5, 2013

Is there a quick and easy guide that you recommend that explains the tax ramifications of keeping a current residence for investment purposes and purchasing a new residence?

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Jim Simms’ answer
It has been a very long time since I read the IRC, but the first comment I would make is the tax payers’ circumstances will determine the answers to this question. What makes sense to one tax payer would cost a ton to someone with different circumstances.

The obvious ramification would be a stepped up basis in the new home being purchased instead of a potential deferred gain that may someday be exempt. I guess that might be the source of this question, no gain to defer or the seller is underwater in the present property????

My tax code guru always said to look at the entire picture and then look at each section/transaction. That would certainly be correct advice with this subject. One size does not fill all when it comes to taxation.

On a similar topic, there are some strings attached when it comes time to arrange financing on the new property if the existing property is retained as a rental. Don’t assume a rent payment equal to the current house payment wipes out the debt for mortgage qualification purposes on the next home. That’s not how it works. I bump in to this a lot, had one last week.

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
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0 votes Thank Flag Link Tue Feb 5, 2013
This is a really great questions. I am looking forward to hearing some interesting answers here.
Thank you,
1 vote Thank Flag Link Tue Feb 5, 2013
Isn't that mutually exclusive?
0 votes Thank Flag Link Tue Feb 5, 2013
That is indeed a really good question.
0 votes Thank Flag Link Tue Feb 5, 2013
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