How much time after selling a house do you have to buy a house to avoid the tax penalty?

Asked by Trulia Los Angeles, Los Angeles, CA Fri Mar 15, 2013

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Kathleen Bec…, Agent, Santa Monica, CA
Fri Mar 15, 2013
BEST ANSWER
If you purchase a house and live in it for 2 years as your primary residence, there is no tax penalty...you can take the first $250,000 if your single or $500,000 if your married capital gains tax free, over the original cost basis.

So...if you purchase a house at $400,000, that is your cost basis. If your house has a substantial increase in value, and you sell it, let's say for $800,000, and your married, then you have a capital gains of $400,000, in which you can take out tax free.

Now, if you have sold a property that is not your primary residence, and is an income property, and you make over $200,000, then you may be subject to capital gains tax and also the new 3.8% Medicare Tax. I suggest you check with your accountant to get more information.

If your property is an income property, then there is a 1031 exchange that you may want to do, which you would need to identify a new like for like property to purchase during the escrow period.

I suggest strongly that you check with your accountant to discuss your tax liabilities.

Good luck!

All the best,

Kat
0 votes
Hi, what if you make less than $100,000 ? in regard to (Now, if you have sold a property that is not your primary residence, and is an income property, and you make over $200,000, then you may be subject to capital gains tax and also the new 3.8% Medicare Tax. I suggest you check with your accountant to get more information. )
Flag Fri Sep 15, 2017
Paula Montgo…, Home Buyer, Pittsburgh, PA
Wed Nov 15, 2017
We have a 2 on 1 property: main house and granny flat rental. We claim 35% of expenses towards rental. We have lived in the home for over 20 years. My question is can we take the cap gain exemption and do a partial 1031 since we have had the other unit getting in com?
0 votes
Christina, Home Buyer, Concord, CA
Fri Nov 14, 2014
So if you sell your primary residence you are allowed a capital gain of up to $250k without having to pay a capital gain tax, correct? Does that mean you don't get taxed on it at all? Does it get included as part of your income? Taxed in your income tax bracket?
0 votes
carlos parra…, Other Pro, Monrovia, CA
Sat Mar 16, 2013
It depends on your tax situation. In general terms.
If you are single or taxes are filed as individual you are allowed $250,000 tax exemption on the sale of your home if married or filing jointly you are allowed $500,000
If you are investor, and this is not your home, it based on tax year income.
If it is 1031 exchange you have 6 months.
You definitely should speak to your accountant about your specific tax situation
0 votes
SERGEY FEDNOV…, Agent, Beverly Hills, CA
Sat Mar 16, 2013
It is best to consult with licensed accountant or CPA regarding any tax related questions.
0 votes
Ron Escobar -…, Agent, Beverly Hills, CA
Fri Mar 15, 2013
I am not sure what tax penalty you are talking about. Did you mean pay capital taxes? If so the general rule is that if you live in the house as your primary home for three out of the last 5 years, then you have an exception of not paying taxes on $250K gain per spouse. If it is a non-owner occupied property then you can do a 1031 exchange to defer capital gain taxes.

Taxes are usually a very complex subject of discussion and most professionals want to shy away from discussing them due to liability concerns. You can email me or contact me outside of this forum and I may be able to give you further information.

Ron@select-realestate.com
0 votes
It's actually 2 of the previous 5. This is precisely why issues related to taxation should be directed to a tax professional, not a realtor.
Flag Fri Mar 15, 2013
Al Goldberg, Agent, Beverly Hills, CA
Fri Mar 15, 2013
Hi,

It depends if the house is your personal residence, or an investment property.

Let me know which it is, the rules are different.

Al Goldberg Broker
ALYourBroker@yahoo.com
800-765-3609
0 votes
Sona Gallatin, Agent, Santa Clarita, CA
Fri Mar 15, 2013
Tax questions, seek the advise of a licensed accountant. Legal questions ask an attorney. Licensed Real Estate agents are prohibited to give legal advise.
0 votes
Madelaine Ko…, Agent, Los Angeles, CA
Fri Mar 15, 2013
Please speak with your accountant about tax consiquences. There are Capital Gains tax if you sell and new health care tax... ect... You can do a 1031 exchange if it is not your primary residence.
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