You can only have one primary residence at a time. Simply declaring to the world that your new home is actually your primary residence isn’t quite enough. You actually have to live there for a majority of each year. In general, when you sell your home and it is your primary residence, you can exclude from federal income tax $250,000 (if you are single, or $500,000 if you are married) of the profits from the sale of the home. But you must have used the home as your primary residence for two out of the last five years. Learn more about what it means to have a primary residence.
A homeowner selling a portion of their lot and continuing to live in their current home wants to know what capital gains will need to be paid on the sale. You are not required to pay capital gains taxes on the sale of residential property as long as you have lived in the home for 2 of the past 5 years. The capital gains exclusion is up to $250,000 if you're single and up to $500,000 if you're married.
What should you do when you buy a home at the height of a real estate bubble? Should you try to rent out your other property or sell it? And what effect does not having a spouse's name on a title have on the capital gains tax you pay upon sale? Is it a good idea to take the money you receive as income from your rental property and use it toward the mortgage for your primary residence?
Just calling a home your sold home your primary residence doesn't mean you'll avoid capital gains taxes. Using a 1031 exchange when selling a home and buying a new one can help defer capital gains taxes. With a 1031 exchange, you can swap investment property for another income-producing property that costs at least the same amount.
There are ways to avoid capital gains taxes when selling your primary residence, but you'll still face a tax burden when selling rental property. If you live in a property for two years before selling it, you can keep your profits tax free. A 1031 exchange is also an option that allows you to defer capital gains taxes.
To maintain a primary residence in a particular state, you generally need to live in that state more than six months of the year and the home you own there must be your primary residence. When a person has a primary residence, they generally work and live in the same general area, register to vote in that community, obtain a driver's license in that state and maintain contacts with that community. It's unlikely that a husband and wife could claim separate primary residence.
A lucky investment property owner has the opportunity to flip a property and make a profit. If the owner wants to keep investing in real estate, a 1031 exchange might be a solution to defer taxes. Making the investment property your primary residence for two years before selling will also allow you to keep the profits tax free.
A closing date is moved several times and the borrower wonders if they can cancel the loan. Your purchase is governed by the terms of your purchase agreement. You must abide by the terms of that agreement or you risk being sued by the seller or losing your escrow deposit, or both.
A homeowner owns investment property that her parents live in without a formal lease agreement, and is ready to buy another home. The lender will look at the investment property as her sole responsibility without proof that her parents make payments that help her pay the mortgage. A lease agreement that show how much the parents are paying each month to live in the investment property would help show income to the lender and give her more to spend on her second home.
A new condo owner is confused about whether she owes gift taxes or capital gains on the sale of her mother's home. Ilyce explains the rollover replacement rule and gift taxes versus capital gains. Always get a real estate attorney and tax adviser when selling a home when taxes like the gift tax or capital gains are involved.