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Forum
-> Household Management
-> Finances
amother
Beige
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Sun, Aug 13 2017, 7:31 am
If you got your house as a "Gift" (if you didnt pay for it, if you got it from parents/in-laws, etc), when you sell, Uncle Sam gets a huge portion of the sale price.
Bottom line, you cant buy another house, because youre left with much less to buy with, because taxes eats up the sale price. So you cant move, unless you want to rent your house and rent elsewhere and be a tenant.
Has anyone found a legal solution?
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FranticFrummie
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Sun, Aug 13 2017, 7:40 am
Will you be left with enough for a downpayment on a smaller house or a condo?
I flipped houses for a long time in the 90's when the market was really hot, and I never found a way out of the captial gains tax. All you can do is keep downsizing.
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amother
Beige
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Sun, Aug 13 2017, 7:44 am
FranticFrummie wrote: | Will you be left with enough for a downpayment on a smaller house or a condo?
I flipped houses for a long time in the 90's when the market was really hot, and I never found a way out of the captial gains tax. All you can do is keep downsizing. |
It would be a loss of lots of money out of my adult children's mouths, so an idiotic thing to do, unless theres a legal loophole. Also at this age, who wants to start with a mortgage?
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FranticFrummie
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Sun, Aug 13 2017, 7:54 am
Another thought: If you own the house free and clear, you have an asset that will keep getting more valuable. Even a run-down house has land value.
If you absolutely MUST move out, you can always rent the house, and live off of the rental income, especially if you end up renting a cheaper place than the cost of the rent on your property.
A fully paid for house would be a wonderful thing to pass on to your kids at some future date.
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amother
Beige
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Sun, Aug 13 2017, 7:59 am
FranticFrummie wrote: | A fully paid for house would be a wonderful thing to pass on to your kids at some future date. |
And that happens to be the only sensible option it seems.
It would be idiotic to take a loss to Uncle Sam of so much money.
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GetReal
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Sun, Aug 13 2017, 8:54 am
Are you sure? Aren't you exempt from capital gains tax on the sale of a primary home if you owned it and lived in it long enough?
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amother
Turquoise
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Sun, Aug 13 2017, 8:57 am
you can still exclude 500,000 of the gain. So even if the house a has a basis of $0 you will have $500,000 in your pocket tax free. Not sure why that makes it impossible to move. You will also still have $ left on the taxable portion of the gain.
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amother
Beige
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Sun, Aug 13 2017, 9:38 am
amother wrote: | you can still exclude 500,000 of the gain. So even if the house a has a basis of $0 you will have $500,000 in your pocket tax free. Not sure why that makes it impossible to move. You will also still have $ left on the taxable portion of the gain. |
Thats correct, but house is in the center of a highly desirable Brooklyn neighborhood and has a sky high value. That would leave lots of money from the sale, highly taxable.
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iluvy
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Sun, Aug 13 2017, 10:00 am
You can put money into the house to offset the gain.
You can also take the gain in a year where you have losses from other assets such as stocks.
**Not legal advice.**
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amother
Turquoise
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Sun, Aug 13 2017, 10:05 am
amother wrote: | Thats correct, but house is in the center of a highly desirable Brooklyn neighborhood and has a sky high value. That would leave lots of money from the sale, highly taxable. |
Long term capital gains rates are fairly low - especially if you otherwise aren't earning much money.
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