Capital Gains - Need Help Keeping It As Painless As Possible!
Hey everyone, I'm new to this forum and the real estate world. I closed on a condo back in February in southern california at age 20. My fiance and I are getting married in December and are looking to build a home in Missouri. I stand to make about $45,000 in the sale of the condo. I obviously have not lived in it for 2 years yet, and might not even hit the 1 year mark, depending on the construction time of the new house. OK, now for the questions:
#1 We are not being forced to transfer for ocupational reasons, but we will be obtaining new careers in the area in which we are moving. Can we reduce our taxes based on this?
#2 I have also heard that there is an exclusion based upon "quality of life". We both despise SoCal and that is in part, why we are leaving. Is there anything we can use to reduce taxes in this aspect?
#3 Can we avoid taxes by transfering the equity into the new home?
#4 Does anyone know the income guidelines for the different tax brackets? It wouldn't be all that bad if I got lucky and fell into the 5% bracket, but the 15% is a little more painfull.
I hope these questions are easy to answer. I would like to prevent uncle sam from claiming more of my money if possible.
Thanks in advance!
BinkyD,
Let me be among the first to offer you my best wishes for your upcoming marriage, and my most hearty congratulations to your husband-to-be.
As you know, there are a few exceptions to the two year rules which allow you to take a prorated capital gains exclusion when you sell your primary residence.
One of these permitted exceptions is "job relocation." The IRS has left plenty of room to apply a very broad interpretation to the phrase "job relocation". Notice that the language does not mention "forced transfer". Relocation to a new area to take advantage of employment opportunities offered by a career change, in my mind, is certainly included in the phrase "job relocation".
Because you will have owned and occupied your current primary residence for about ten months prior to the sale, your prorated exclusion is approximately $104K. As long as your sale profits are less than $104K, your profits are tax free.
If your future spouse is also selling a primary residence, he can also take advantage of the capital gains exclusion on the sale of his property.
Consult a professional tax advisor for specific details for your situation.
Thanks for you response Dave! Its great to know that I'll be able to keep most of my money. My Fiance and I (BTW I am the groom-to-be ) were going nuts b/c we had originally thought that we were going to have to pay recapture fees as well, the loan was CHaFFA funded. (my lender informed us that since my income did not change over this time I was free of that as well) So now we can breathe easier knowing that uncle sam isn't going to take the money we've made.
BinkyD,
It was hard to tell your gender from your screen name. My only clue was a reference to your future spouse as your "fiance". Fiance is defined as a man who is engaged to be married.
A woman who is engaged to be married is a fiancee -- slightly different spelling.
In any event, my congratulations to you on your engagement and best wishes to your fiancee for a long and happy marriage.