Home sales capital gains on taxes

[Susie_B]

What is the name of your state?California

Hello folks this past Dec 2018, in Los Angeles CA, we found a great deal on a home and we bought it. Then the very second week of January 2019 we sold our main home and used that money for the one we bought. I was told that we can save 28% or so on capital gain.

Can someone please advise me what we need to do so we don’t have to pay it? We were also told that we only have 6 months, from the time the home was sold, to capitalized on this opportunity.

Thanks so much!

Susie

 

[FlyingRon]

You are apparently confusing the 1031 exchange rules for investment properties and what applies to personal residences. There is not rollover/exchange exclusion for personal residences.

If you have lived in the property as your personal residence for 24 out of the 60 months prior to the sale, you may qualify to exclude $250,000 (or $500,000 for couples) of the gain.

 

[adjusterjack]

No need to post on every forum on the internet, Susie.

This publication answers all your questions.

https://www.irs.gov/pub/irs-pdf/p523.pdf

 

[LdiJ]

You are apparently confusing the 1031 exchange rules for investment properties and what applies to personal residences. There is not rollover/exchange exclusion for personal residences.

If you have lived in the property as your personal residence for 24 out of the 60 months prior to the sale, you may qualify to exclude $250,000 (or $500,000 for couples) of the gain.

And I want to emphasize the word "gain". Lets give an example: Lets say that you originally purchased the first home for 600,000 dollars and you lived in it as your primary residence up until you bought the new home. Lets say that you made some major improvements to the original home that cost you 50,000. That would make your basis in the property be 650,000.

Now, lets say that you sold it for 1,000,000 and realtor commissions plus closing costs were 90,000. That would make your sales proceeds 910,000. 910,000 minus 650,000 would be 340,000. If you are married you can exclude the entire gain and therefore would have no taxable capital gain. If you were single you would have a long term taxable capital gain of 90,000.