Anyone know when capital gains taxes apply on home sales?

[dderidex]

Here's the situation - moved to central Oregon a year and a half ago. Have been telecommuting for my previous employer (worked in the main office for 7 years doing a ton of SQL stuff, they didn't want to lose me as I was so familiar with the customers and system).

HOWEVER, CEO recently died (about 6 weeks back?) and the resulting financial turmoil with investors and customers means our company will likely be ceasing operation...oh, pretty soon.

I had guessed that this would happen when our CEO died, and so have been furiously looking for a job anywhere in Oregon. The companies I've had offers from locally (Bend) have generally been offering roughly HALF of what I make now for the same work (and I'm well underpaid for my position according to national averages already)!

Obviously, we cannot continue living here on that income! OTOH, I don't expect the company to last out the month, and we'd still need to live here 7 more months before we've been here two years.

So, what's the situation on a house sale in such a case? We'd like to move somewhere less expensive where I CAN get a job, but we've not lived here two years yet, and I am under the *impression* that makes the sale of the house entirely taxable.

 

[imported_Mike]

I believe you are correct

 

[DJFuji]

I think so too. You could always look into a 1031 exchange? Dont know if that will work in your situation though...

 

[Orsorum]

Hmm. Yeah, you're kind of stuck on that.

 

[dderidex]

Would it make a difference if we moved into a more expensive house? I'm thinking 'yes', but how would that work? Does it just have to be any time in the same tax year the house sold, or within a certain window of time, or what?

 

[AnyMal]

Have you considered renting it out for the remainder of the two-year period?

 

[quakefiend420]

Originally posted by: AnyMal
Have you considered renting it out for the remainder of the two-year period?

that may not be a bad idea...as long as they don't trash the place

 

[KK]

Originally posted by: quakefiend420

Originally posted by: AnyMal
Have you considered renting it out for the remainder of the two-year period?

that may not be a bad idea...as long as they don't trash the place

Is there anything goofy with the home you sell for a gain, has to be the one you are residing in?

 

[OffTopic1]

Don't you have to live in your primary home to avoid capital gains?
In Canada/BC the above apply.

 

[dderidex]

Originally posted by: AnyMal
Have you considered renting it out for the remainder of the two-year period?

You have to live in it as your primary residence for the 2-year period, AFAIK.

 

[Orsorum]

Originally posted by: dderidex

Originally posted by: AnyMal
Have you considered renting it out for the remainder of the two-year period?

You have to live in it as your primary residence for the 2-year period, AFAIK.

Link

Yep.

 

[DJFuji]

yeah that's right dderidex. Google for a 1031 exchange. I know it defers capital gains taxes but dont know if it still qualifies you for the 250/500k tax free gains on primary residence.

edit: i dont have the patience to read the IRS doc, but IIRC it's "primary residence for 2 out of the past 5 years."

 

[Orsorum]

Originally posted by: DJFuji
yeah that's right dderidex. Google for a 1031 exchange. I know it defers capital gains taxes but dont know if it still qualifies you for the 250/500k tax free gains on primary residence.

edit: i dont have the patience to read the IRS doc, but IIRC it's "primary residence for 2 out of the past 5 years."

Well, you could look into it, but you'd have to prove that you initially purchased the house for investment purposes, and that you were purchsaing the new house for investment purposes.

"There's business, investment, and personal, and never the twain shall meet."

 

[d3n]

If you leave your job in a way that entitles you to a single month of state unemployment compensation then your Capital Gains Taxes will be nulled out despite the previous two year rule.

Another way might be for medical needs. This takes a application to the IRS which is pretty much a case by case thing. Say if you had to move from a two story house to a ranch style because of handicap access for a relative.

As far as salary I would find the employment salary statistics for the area you are looking in and take the stats with you to your job negotiations after they get past the initial phase. An employer won?t be able to fault you for backing up your claim for a higher salary. Especially if they know they want to actually have a quality person fill the job. Good luck.

 

[Orsorum]

Originally posted by: d3n
If you leave your job in a way that entitles you to a single month of state unemployment compensation then your Capital Gains Taxes will be nulled out despite the previous two year rule.

Another way might be for medical needs. This takes a application to the IRS which is pretty much a case by case thing. Say if you had to move from a two story house to a ranch style because of handicap access for a relative.

What's your authority? (I'm not criticizing, just curious)

 

[d3n]

Just personal experiance

I had a friend seperate from the military. Under the law since his contract was over he could draw unemployement compensation and did for a single month as he transfered to a new job. He also chose to move that year to be closer to the new job and made about 100k on his house. The simple fact that his state reported a 1099g or whatever for unemployment compensation was enough to negate the capital gains on his house since he was moving becuase of his job.

The Medical needs was something the wife and I looked into because of our daughter.

 

[SouthPaW1227]

Originally posted by: dderidex

Originally posted by: AnyMal
Have you considered renting it out for the remainder of the two-year period?

You have to live in it as your primary residence for the 2-year period, AFAIK.

Indeed you do, sucks

 

[Orsorum]

Originally posted by: d3n
Just personal experiance

I had a friend seperate from the military. Under the law since his contract was over he could draw unemployement compensation and did for a single month as he transfered to a new job. He also chose to move that year to be closer to the new job and made about 100k on his house. The simple fact that his state reported a 1099g or whatever for unemployment compensation was enough to negate the capital gains on his house since he was moving becuase of his job.

The Medical needs was something the wife and I looked into because of our daughter.

Well I was hoping for a code section or a treasury reg, but that'll do.

 

[d3n]

Are you kidding.. look up tax code? Blah.

 

[Orsorum]

Originally posted by: d3n
Are you kidding.. look up tax code? Blah.

Mmm, I just took a business tax final Monday morning so I'm still thinking in code sections.

 

[Blieb]

there's hardship and stuff you cn get exempt for, like if you lose your job ...

1031 is for investment props only

 

[richardycc]

take the lower paying job, but still look for a better paying job in the meantime, once your 2 yrs is up, by then hopefully you have another job line up. Then move and sell your house

3. profit!?

 

[Kelemvor]

It's different for the state and the federal. I think federal is the 2 years thing but states can vary. In-Laws had a condo in FLorida they were selling so they moved there to establish residency by the first of the year they were selling it and that was all they had to do.

 

[Double Trouble]

dderidex, you can avoid having to pay capital gains taxes on the sale of your home if you qualify for the IRS hardship exception. The exception covers medical costs, divorce, or job transfers over 50 miles. There might be other conditions you might meet for the exception, but I'm guessing if you take a job > 50 miles away, you could sell your home without incurring capital gains taxes.

Good luck!

 

[flot]

Someone correct me if I'm wrong, but I BELIEVE -

You can only do this once every 2 years, that is fact.

However, if you stay in your place less than two years, the amount of profit that you can exclude from cap gains is prorated. IE if you only lived there 1 year, the first $250k of profit would be untaxed.

So, if you already used this trick when you sold your last house, out of luck. But if this, for instance, was your first home - you'd be fine. ?


PS: It isn't the SALE of the house that is entirely taxable, it's your profit on the house... which may or may not be such a big deal..? If you've only lived there a year, how much has it appreciated?