How much capital gains tax (%) do you pay when selling your home, when you have lived there less than 2 years?
Selling price was 5,000 on a traditional 100% 30 year fixed. re-fi two weeks later on a 80/20 30 year fixed due to loan to value to avoid PMI. House just appraised for 0,000. Reason for wanting to sell: we would like to move closer to our jobs. But we would hate to give Uncle Sam free money.
3 Responses
WealthBuilder
18 Jun 2010
Wayne Z
18 Jun 2010
Under 1 year: Normal Income Tax Rate (as high as 35%)
Over 1 year (but under 2): 15%
CPA
18 Jun 2010
The simple answer is your capital gains tax rate for selling your home if you are not eligible for a section 121 exclusion is your regular capital gains rate (or ordinary income tax rates, depending on time held).
However, it may be more complicated than that. You may be eligible for a partial 121 exclusion depending on your circumstances. IRS Pub. 523 is a must read for you. You may also consider a consultation with a professional BEFORE you do anything. He/she will be able to walk you through the tax consequences of your decision.
Some assumptions:
Sell for 330K – 8% selling costs = 303,600. Subtract basis of 205K = 96.6K profit.
Sell BEFORE one year if you are in 25% bracket, and you pay the Uncle $24,650.
Wait for 1 year holding and tax is 15% or $14790.
Wait 2 years and tax is $0
If you move for your job (typically, but not absolutely 15 miles or more), you MAY get a partial preotection of the portion of the $250K/$500K Section 121 exemption.