Capitpl Gains Tax
My husband and I purchased his mothers home last year after paying her mortgage for 1.5 years. We have decided to sell the home after doing a lot of improvements to it. Will we have to pay Capital Gains tax and if so how much?
Did you occupy the house as your primary residence?
Yes the house is our primary residence
If you have lived in the property as your primary residence for at least 24 months out of the last 60 months you will be able to exclude up to $500K in capital gain taxes pursuant to Section 121 of the tax code. If you have lived in it less than 24 months, then you would be subject to taxes.
[addsig]
kwilsey,
Mr. Exeter only told you half of the story. To qualify for the capital gains exclusion on your primary residence, the two year rules have two parts.
First you must have OWNED the property for two of the five years prior to the sale, and second you must have OCCUPIED the property as your primary residence for two of the five years prior to the sale.
Since it appears that you only acquired title to the property last year, you do not qualify for the capital gains exclusion because you do not meet the two year ownership requirement.
Unless you can postpone your sale until you meet the two year OWNERSHIP and OCCUPANCY requirements, all your profit on the sale will be a taxable capital gain.
[ Edited by NewKidinTown2 on Date 09/23/2004 ]