Capitol Gains Question
I bought a house in 1999 for $92,500- and lived there until 2002. I moved out and used it as a rental for this past year. I am selling the home for $170,000-.
How do I avoid paying for capitol gains? Can I reinvest? If so, do I need to buy a house within 2 years for the amount of $170,000-? Does it need to be used as a rental or can it be owner occupied. I sold the house as a rental.
I am a RE investor as well. What would happen if I purchased a house for $70,000- and another for $100,000-? Would that work?
I also heard that if the house is sold for under $250,000- that you are 'exempt' from paying capitol gains? Is this true?
:-o
Basically if you live in a home 2 out of the past 5 years than you qualify for a capital gains exclusion of $250,000 (or $500,000 if you are married). This does not mean the sales price is under that price....only the GAIN on the property.
Please read this article I wrote. It should answer all of you questions:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=415[ Edited by myfrogger on Date 04/14/2004 ]
The word "Capitol" should only be used when referring to the domed capitol building of a state or the US government. Any other use of the word is "Capital". Confused? Just remember the round shaped dome is line an "O". OK? Just thought I would add some proper grammar to this post.
You have two options. You have lived in the house as your primary residence and you are currently renting the home out.
So, you could structure the sale pursuant to Section 121 and EXCLUDE up to $250K if you are single and $500K if you are married if you lived in the house as your primary residence for 24 months out of the most recent 60 months. If you fall short of the 24 month requirement, the requirement is not consecutive, so you could move back into it to satisfy the 24 month requirement and then sell pursuant to Section 121 (Tax FREE up to the limits).
Or, you could sell immediately and structure it as a 1031 exchange transaction and purchase like kind replacement investment property (Tax Deferred).