Tax question re: selling/buying property

Discussion in 'Homesteading Questions' started by Cygnet, Dec 7, 2005.

  1. Cygnet

    Cygnet Well-Known Member Supporter

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    I've got a fairly substantial amount of equity in my property -- enough that I could sell it & buy property where I want to move (Rye/Gisela area of Arizona) and have about $100K left over.

    I'm planning on buying a fixer upper and fixer-uppering it very nicely. Probably a smaller house -- I have severe allergies and would tear out any carpeting and replace it with tile, etc. Put a tin roof on for fire protection, etc. Probably also put up a few outbuildings for offices and stalls.

    But I suspect (and this amazes me) that even after I fixed a place up, I'd have money left over.

    How's that work with the taxes? I know I have to BUY another property for my profit on this house not to be taxed, but what about the difference between the sale price of this one and the purchase price of the new one?

    I know I need to talk to a tax advisor before I move, but I'm trying to get an idea of how this will work.

    (Also, my company's probably moving in several months -- grr -- wish they'd decide where they want to move to. I'm trying to avoid commuting on the freeways in Phoenix while still staying in the country!)

    Leva
     
  2. Ramblin Wreck

    Ramblin Wreck Well-Known Member Supporter

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    Cygnet,

    Below is a link to an IRS web site covering the sale of a personal residence. You may be able to exclude up to $500K in profit (on a joint return). Good luck.

    http://www.irs.gov/taxtopics/tc701.html
     

  3. agmantoo

    agmantoo agmantoo Supporter

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    In recent times I have only done 1031 exchanges. In these exchanges you can do a like kind swap without tax implications with the monies. The only catch is the manner you handle the transaction and the timing. All money not used in the trade does become taxable, taxable at capital gains rates for federal and state. Fed tax is 15% and the state depends on where you reside.
    There are means, with which I am not familiar, where you can sell your home that you have owned for a duration and have a substantial amount of money that is not taxed. You will need to review both methods to determine which better meets your needs and requirements. Good luck and enjoy your good fortune.
     
  4. Iddee

    Iddee Well-Known Member

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    See a tax pro. If you have lived in your home for 2 or more years out of the last five the property is Federal tax free up to a certain point. I think 500,000,
    but not sure about that.
     
  5. Cygnet

    Cygnet Well-Known Member Supporter

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    Thanks. That's what I need to know. (It doesn't qualify for a 1031.)

    I have two options -- split it and sell it in two pieces, or sell the thing in as one lot. I'd get a capital gains tax on the split off land that looks like it would negate the extra I'd make selling two pieces vs. one piece of land. So I'll probably sell it as one property.

    Leva

     
  6. Michael W. Smith

    Michael W. Smith Well-Known Member

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    Yep, I'd sell it as one property, and then move on to another property. Find a fixer upper, fix it up as you live in it, live in it for about 5 years and sell it and find another. People do this all the time, and there is money to be made in it as long as you do the bulk of the remodeling. Of course, a booming housing market helps as well, but even in a stagnant one, as long as you buy a fixer upper for cheap, you still should be able to sell it at a good profit even with the money you put into it to fix it up.

    Have fun!!