Any accountants out there?

I bought a loft in Portland, OR on May 20th, 2004 for $210k. Accepted an offer with a different company and moved across the country in June 2005. Rented my place from middle of June 2005 to current.

Thinking about selling the place, $300-$330k, so $90-$120k more than I paid for it.

I obviously don't want to pay taxes on the profit if I don't have to. I have limited knowledge of the 2 year/5 year law...live in a house for 2 out of the past 5 years, considered a primary residence, don't have to pay capital gains, etc, up to $250k in profit

Now I "think" I read it could be 1 year if making less than $125k? is this incorrect? What am I really on the hook for, tax wise?

Now I know I should go to a real, real estate accountant, but I'm sitting here on a sunday thinking about this!

Thanks

 

Yea you should.

 

maybe a good indication of where the s2000 board has gone....similar question asked on the lotus board, answered right away, w/out the smart ass reply...

 

they are probably smarter than us.

what was the answer?

My guess is "2 years out of the last 5" means exactly that and you would have to pay federal (and state) taxes on the full amount of the gain.

 

the rule is u must live there for 2 years to be eligible for 250k capital gains tax free (for an individual, 500k for married). However, there is a small loophole, if u need the money for an emergency, u are allowed to pro rate how much you get tax free based on the time you lived in the condo. So lets say u live there a year, have a heart attack, and need to sell the house to pay medical expenses. You are allowed to sell your house and 125k will not be taxed... I forgot what the definition of emergency is tho... if you go to any library, u can find a easy to read tax book that will explain it better in simple language... there are a million of them, just make sure it is up to date

 

There is also an exemption for being forced to move because of work.

Go here

http://www.irs.gov/publications/p523/ar02.html#d0e1908

and search on "Safe Harbor" and Worksheet 3

"Example.
Justin was unemployed and living in a townhouse in Florida that he had owned and used as his main home since 2004. He got a job in North Carolina and sold his townhouse in 2005. Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Justin's sale of his home is because of a change in place of employment and he is entitled to a reduced maximum exclusion of gain from the sale. "

 

You can avoid the tax by reinvesting the money. Otherwise, you cannot avoid it. You can tinker with the sum of the taxable money.

For instance. You buy the house for 100K. You sell for 500K. You pay taxes on 400K.

You can sell the house for 300K, and 200K under the table, thus, only paying taxes on 200K.

However, most people pay for a house with mortgage money, and that cannot be hidden.

Also, the only way this would work is if someone HAS the 200K in cash to pay you.

 

Not true. That used to be the case but the Tax Relief Act changed that. You get 250K or 500K if married of profit tax free (or a lesser amount subject to the link I posted above.) You do get to adjust the cost basis of the house for any improvements you made such as a kitchen remodel or whatever.


If Sale price - (Purchase Price + Improvements + Sales Fees) > 250K you pay taxes on everything above the 250K.

 

Sorry....you are correct. I should have mentioned you need to have a corpotarion to use that scheme.

 

How do people manage to hide $200k under the table?