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Hey all,
I may be on the wrong forum, but would someone PLEASE explain to a first-time home buyer, exactly what capital gains tax is? I purchased my first home in April '08 --closed and all. And for hypothetical reasons wanted to sell the house in April '10, would I be hit with the tax or would I have to wait after that date? I am so confused. Thanks for you patience.
Hey all,
I may be on the wrong forum, but would someone PLEASE explain to a first-time home buyer, exactly what capital gains tax is? I purchased my first home in April '08 --closed and all. And for hypothetical reasons wanted to sell the house in April '10, would I be hit with the tax or would I have to wait after that date? I am so confused. Thanks for you patience.
My quick answer (I'm not a CPA) is no for several reasons:
1) You probably won't have capital gains to tax in the first place since we are in a falling market. (That's the cynic in me talking).
2) As the law is currently written, if this is your primary and only home, you can exempt the first $250,000 of capital gains ($500,000 if married).
Note that we (the taxpayers) just spent $700,000,000,000.00 on a bailout and congress will need to figure out how to pay for it. I wouldn't be surprised to see them tweak the capital gains tax exemption....
My quick answer (I'm not a CPA) is no for several reasons:
1) You probably won't have capital gains to tax in the first place since we are in a falling market. (That's the cynic in me talking).
2) As the law is currently written, if this is your primary and only home, you can exempt the first $250,000 of capital gains ($500,000 if married).
Note that we (the taxpayers) just spent $700,000,000,000.00 on a bailout and congress will need to figure out how to pay for it. I wouldn't be surprised to see them tweak the capital gains tax exemption....
The $250,000 comes with restrictions, it's not automatic. For example, you must live in the home for two years, with certain exceptions, in order to take advantage of this. The link I previously posted on this thread goes into detail on this.
The $250,000 comes with restrictions, it's not automatic. For example, you must live in the home for two years, with certain exceptions, in order to take advantage of this. The link I previously posted on this thread goes into detail on this.
The OP presented the hypothectical situation that he bought in April '08 and sold April '10. That meets the two year requirement.
The way the OP worded his question, I don't know if he understands that you WANT your gain to be labeled as "capital gain" because it is taxed at a lower rate.
Also, with the new president, capital gains may not be as generous as it once was. Only time will tell.
I've never owned a home but I'm sure there is a time frame you have to keep your house before the sale is considered a capital gain. For examples, stocks need to be kept for 1 year before it is considered capital gain.
The way the OP worded his question, I don't know if he understands that you WANT your gain to be labeled as "capital gain" because it is taxed at a lower rate.
Also, with the new president, capital gains may not be as generous as it once was. Only time will tell.
I've never owned a home but I'm sure there is a time frame you have to keep your house before the sale is considered a capital gain. For examples, stocks need to be kept for 1 year before it is considered capital gain.
Actually if stocks are kept less than a year they are considered short term capital gains and taxed at an even higher rate.
As stated, for a home if you lived in it for 2 years as the OP intends to do he can exclude any profit up to $250,000 or $500,000 if married, and would only pay capital gains on anything over those amounts.
Actually if stocks are kept less than a year they are considered short term capital gains and taxed at an even higher rate.
As stated, for a home if you lived in it for 2 years as the OP intends to do he can exclude any profit up to $250,000 or $500,000 if married, and would only pay capital gains on anything over those amounts.
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So in my situation, (selling my house), I am going to be lucky if I make a $3,000.00 profit on my home. In that scenario, I would not owe any capital gains...correct? I hope I'm understanding that link correctly....
So in my situation, (selling my house), I am going to be lucky if I make a $3,000.00 profit on my home. In that scenario, I would not owe any capital gains...correct? I hope I'm understanding that link correctly....
That's correct TexasGirl.
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. Thanks for you patience.
