mr, Home Buyer in Seattle, WA

Tax Question related to home sale

Asked by mr, Seattle, WA Sun Nov 4, 2012

Hi,

I plan to sell my primary residence and use most of the proceeds as a down payment on another home that would be my primary residence. However I'm wondering if I can use a portion of that money to improve a vacation home that I also own. In that case what would be the tax implications? The primary home I plan to sell I've owned for 7 years.

Thanks!

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9
Debra (Debbi…, Agent, Livingston, NJ
Sun Nov 4, 2012
If you are asking about capital gains taxes - if you're single, you get to deduct $250,000 from your profit before captial gains taxes kick in (couples can deduct $500,000).

I hope you kept a list of any capital improvements you made over the past 7 years (new bathrooms, kitchen, windows, roof, etc)..........as those costs can factor into your base cost (what you paid for the house, plus the improvements). You subtract your total cost form the sale price to determine your profit.

You can use whatever you want from the proceeds of the sale to improve another home.

There are no "rollover" requirements with tax consequences anymore..

Please speak to an accountant for further clarification.
2 votes
Debra (Debbi…, Agent, Livingston, NJ
Sun Nov 4, 2012
Here's a link with more detailed information on this subject


http://taxes.about.com/od/taxplanning/qt/home_sale_tax.htm
1 vote
Mark Lindberg, , Seattle, WA
Sun Nov 4, 2012
Unless you have been extremely fortunate you should not have to pay taxes on the proceeds from the sale of your home. Married couples or co-owners who file taxes jointly may keep $500,000 in profits tax-free on the sale of a home they have owned and lived in for two of the past five years. Single homeowners may keep $250,000 in profits tax-free on the sale of a home they have owned and lived in for two of the past five years. That being said you should be able to use any or all of the proceeds to improve your vacation home. As always you should check with your tax accountant for specific advice on your situation.
1 vote
Kary Krismer, Agent, Renton, WA
Sun Nov 4, 2012
As mentioned, you should consult an attorney or CPA about your tax issue.

From your question though I think you're probably dealing with tax issues that are about 15 years or more out of date. It's been a long time since you had to put proceeds of the old house into a new house to avoid taxable gain, and in most (if not all) cases, I don't think that affects anything.

As mentioned, there are now $250k/$500k exemptions, but that does not mean all sales of residences are tax free. For example, I believe you might have some tax consequence if you've depreciated your house in the past, such as for a home office. Again, you need to consult an attorney or CPA.
1 vote
Sally Grenier, Agent, Boulder, CO
Sun Nov 4, 2012
I would seek the advice of a CPA or tax attorney.
1 vote
Kary Krismer, Agent, Renton, WA
Sat Nov 17, 2012
It should again be noted that the sale is not necessarily tax free just because you lived there 2 of the past 5 years. If the property has been rented or used as a home office since 1997 (????), then there may be recapture of the depreciation which was taken, or should have been taken.

Another reason to consult a tax professional about your specific situation
0 votes
Dan Edwards, Agent, Bellevue, WA
Sat Nov 17, 2012
All the answers below are great, however I would strongly recommend you talk to a tax planer that knows you and your specific needs. If you need a introduction I would recommend Mike Markert in Kirkland.
0 votes
Jirius Isaac, Agent, Kenmore, WA
Sun Nov 4, 2012
Debra has the right answer below so I doubt if you need to worry about taxes or what you do with the proceeds. Have fun & good luck to you.

Good luck to you in any case,
Jirius Isaac
Isaac Real Estate Team
Champions Real Estate Services
TriStar Finance #MLO-107799
Office: 425-483-6849 Cell: 206-841-9976
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0 votes
Ray Akers, Agent, Seattle, WA
Sun Nov 4, 2012
First, you will qualify for the $250,000 deduction for homeowners ---or $500,000 for couples. Beyond that, you'll want to consult with a CPA. Without knowing your tax situation, it's difficult for anyone to advise you regarding tax implications, or what would be the best strategy for you. Good luck.
0 votes
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