I own only one home, but because of my husbands's job we had to relocate into a different city, as a result

Asked by I. Romero-alfaro, Fri Nov 7, 2008

we are renting the only home we have.
We refinanced it and since we don't live there, it had to be refinanced as an invesment property.
Now, we want to sell it, so we can buy a new home where we live, but I understand I have to pay capital gain taxes is sold.
Here are my questions:
1) Technically is an investement property, bu in reality it is not, is there an exception when the circunstances are like mine?

2) If the house is considered a property investment, how much will I pay in capital gain taxes if sold?

3) What are the possible options that I have, because I can not afford another house if I don't sell the one I have, does it have to be considered an investement property?

Thanks a lot!

I. Romero-Alfaro

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David Dee, , San Gabriel, CA
Sun Jan 4, 2009
Hi Romero-Alfaro,

That would depend on a few criteria. It depends on how long you have lived on the property. If you have lived in the house for 2 of the past 5 years, there is a capital gains exemption. You will not have to pay capital gains up to 250k if single or 500k if married. If it is an investment property, you can deferred the capital gains tax by doing a 1031 exchange. Good luck and hope that helps.

David Dee
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Daniel, , Baton Rouge, LA
Sat Nov 15, 2008
I thought you pro Obama Californianians were all about socking to those paying capital gains!

Enjoy what you created!

Come on, step up to the plate and as Biden said, it patriotic for you to pay taxes!
0 votes
Baker & Snid…, Agent, Arcadia, CA
Sat Nov 15, 2008
Yes, that is correct if you have lived in the home for 2 of the last 5 years (in any order) then it qualifies as your principal residence and not investment property. If that is the case, then both you and your husband should still be able to take profit on the sale up to $250,000 each for a total of $500,000 above your purchase price price before worrying about the capital gains tax.

Of course, if it does not qualify as your personal residence through this method or if you are lucky enough to anticipate more than $500,000 in profit from this sale you should contact your CPA for advice.

Good Luck!!!
0 votes
Irina Netcha…, Agent, San Marino, CA
Fri Nov 7, 2008
Hi there,

A lot of the answers will depend on how many years the home that you own have been rented for. To take advantage of capital gains exclusion, you need to have lived (owner occupied your home) 2 of the last 5 years. The order of the years is not important.

0 votes
Eric H. Wong , Agent, Albany, CA
Fri Nov 7, 2008
If you lived in your home 24 months out of the last five years, it can still be considered your primary residence in California. I think they even relaxed the law a few years ago, and those 24 months don't have to be consecutive. As far as taxes, you should really talk to a tax consultant or an accountant to get the correct answers. You may also want to talk to an escrow officer to make sure what I told you is correct. I admit to being a little fuzzy on the details.
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Scott Godzyk, Agent, Manchester, NH
Fri Nov 7, 2008
You really need to see your accountant however i know that as it was your residence first, your capital gains will be limited, it is not the full amount you will have to pay. You can also go to irs.gov and look up the new tax laws.
Web Reference:  http://www.ScottSellsNH.com
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