Capital Gains Questions

[sleuth]

Is capital gains taxed at both the federal and state levels? Do the capital gains laws differ from state to state?

I'm thinking about selling my house this year, and moving back to the midwest if I can find a job. However, I only bought the house about 1 year ago, well under the 2 year capital gains requirement that I keep hearing about.

As of now, if I were to sell, I would make about a 30% profit on the home.

Do I still have to pay capital gains if I sell and move to Indiana, and roll all the profit into a downpayment on a new house? If not, do I have to "move up" and buy a home at or greater than the value of the one I sold? (which would be a small mansion in Indiana) or can I go and buy a much cheaper home without penalty, just so long as I sink all my profits into the downpayment?

 

[CMC122]

I think as long as you roll it all over into another house within a 2 year time frame (may have changed) you don't have to pay gains.

 

[sleuth]

Originally posted by CMC122
I think as long as you roll it all over into another house within a 2 year time frame (may have changed) you don't have to pay gains.

But the additional question is... does it have to be a more expensive house?

 

[CMC122]

Originally posted by sleuth
But the additional question is... does it have to be a more expensive house?

That I'm not positive about. I can hook you up with someone who can answer your questions.

 

[crabcake]

Take a look-see at this ...

 

[SmallTown]

Yep, crabby just mentioned it. There are other ways to avoid the tax, one being selling the home because of employment.

I don't think the old rule holds true when you can put the money into another house to avoid the taxes. The tax code is kind of vague on this.

 

[sleuth]

Originally posted by crabcake
Take a look-see at this ...

But what does it all mean?

If you did not meet the ownership and use tests or if during the 2–year period ending on the date of the sale or exchange you sold or exchanged another home at a gain and excluded all or part of that gain, you may be allowed to exclude a portion of the gain realized on the sale or exchange of your home if:

You sold or exchanged your home due to a change in health or place of employment or due to unforeseen circumstances

If I pull down a profit of $50K, what portion is excluded?

 

[sleuth]

Originally posted by SmallTown
Yep, crabby just mentioned it. There are other ways to avoid the tax, one being selling the home because of employment.

I don't think the old rule holds true when you can put the money into another house to avoid the taxes. The tax code is kind of vague on this.

I suppose I could always rent an ultracheap sh!thole apartment in Indiana for however many months it takes to meet the two year requirement. :shrug:

Where's IM4 when you need her?

 

[JabbaJawz]

Originally posted by crabcake
Take a look-see at this ...

We're using our exclusion for the $$ we're making on our house, but of course we can't move again for another 2 years - which of course, won't be an issue anyway. I thought we'd be hosed since we'd only been there a bit over a year, but was happy to hear there's a way around it.

 

[JabbaJawz]

Originally posted by SmallTown
I don't think the old rule holds true when you can put the money into another house to avoid the taxes. The tax code is kind of vague on this.

My tax chick said that rule isn't there any longer.

 

[crabcake]

Originally posted by sleuth
I suppose I could always rent an ultracheap sh!thole apartment in Indiana for however many months it takes to meet the two year requirement. :shrug:

Be aware that once you move outside the state of Maryland, and sell your house, there's some other tax the state tacks on ... I think it's 2%. It's kind of a 'damned if you do/damned if you don't" kinda thing.

 

[sleuth]

Originally posted by crabcake
Be aware that once you move outside the state of Maryland, and sell your house, there's some other tax the state tacks on ... I think it's 2%. It's kind of a 'damned if you do/damned if you don't" kinda thing.

I was figuring on keeping my house as the principal residence, and just having that ultra-cheap apartment as a temporary residence until I'm ready to sell.

That would get me around the tax, right?

 

[crabcake]

Originally posted by sleuth
I was figuring on keeping my house as the principal residence, and just having that ultra-cheap apartment as a temporary residence until I'm ready to sell.

That would get me around the tax, right?

If you are not a legal resident of Maryland any longer and you sell your home from 'out of state', no, it won't get you around it. My realtor told me about it earlier this summer when I was looking at moving to AZ. I'm trying to find something on it for you now.

 

[sleuth]

Originally posted by crabcake
If you are not a legal resident of Maryland any longer and you sell your home from 'out of state', no, it won't get you around it. My realtor told me about it earlier this summer when I was looking at moving to AZ. I'm trying to find something on it for you now.

What qualifies you as a "legal resident"? :shrug:

My house will be here. I'll still be paying the bills and utilities on it. I'll probably leave most of my stuff here until I'm ready to move. I can keep my drivers license and car registration, if need be.

 

[crabcake]

Originally posted by sleuth
What qualifies you as a "legal resident"? :shrug:

My house will be here. I'll still be paying the bills and utilities on it. I'll probably leave most of my stuff here until I'm ready to move. I can keep my drivers license and car registration, if need be.

: one question at a time, daggonit!

You'd have to see what the law says. If you are living and working in another state, I'd think you'd qualify as a non-resident for tax purposes. Some states require you to register your vehicle and obtain a driver's license in the state you are working in if you are there for more than XX# days (e.g., 90 days).

 

[sleuth]

Originally posted by crabcake
: one question at a time, daggonit!

You'd have to see what the law says. If you are living and working in another state, I'd think you'd qualify as a non-resident for tax purposes. Some states require you to register your vehicle and obtain a driver's license in the state you are working in if you are there for more than XX# days (e.g., 90 days).

I was living and working in Texas for 3 months. I didn't change residence.

Heck, if I have to, I'll fly back every couple months to spend the weekend with all of you.

 

[crabcake]

Originally posted by sleuth
I was living and working in Texas for 3 months. I didn't change residence.

Heck, if I have to, I'll fly back every couple months to spend the weekend with all of you.

but your company was here ... you were on temporary duty there. you are talking about leaving your company and finding a new job there. that's the difference.

 

[sleuth]

Originally posted by crabcake
but your company was here ... you were on temporary duty there. you are talking about leaving your company and finding a new job there. that's the difference.

Well... kinda.
I'm looking for a federal job within the Navy and/or the DoD. Technically I wouldn't be leaving my company - I'd be transferring.

 

[crabcake]

Okay ... couldn't find it, so I called my realtor-buddy; he'll call me back with the info in a bit.

If the moves wasn't directed BY your employer, the "unforeseen circumstances" argument doesn't appear it'd hold water. It's your choice; not your employers ... that you are moving.

When I hear back from the realtor, I'll post on it.

 

[JabbaJawz]

Originally posted by crabcake
Okay ... couldn't find it, so I called my realtor-buddy; he'll call me back with the info in a bit.

If the moves wasn't directed BY your employer, the "unforeseen circumstances" argument doesn't appear it'd hold water. It's your choice; not your employers ... that you are moving.

When I hear back from the realtor, I'll post on it.

I called my tax chick and she says we can take a 1-time exclusion. Why couldn't Sleuth do the same thing?