If I sell my house and do not reinvest the profit into a new home will I be hit with the taxes on that money?

Question

If I sell my house and do not reinvest the profit into a new home will I be hit with the taxes on that money?

Answer 1

No, not if you are talking about less then 250k single and 500k married, if you are under that, and owed for over 2 years, you are exempt from capital gains.

If you owned under 2 years you will need to pay the tax on your profit.

Answer 2

You'll get hit on part of the money; the "profit" you made from the house.

If you were to buy the home for 1.2mil and sell it for 1.5mil, you'd get hit for the taxes on the 300k minus 250 for a single(provided you've lived there for 2 of last 5 years) (500k for married).  They are a few other factors that adjust the final number (appreciation, depredciation, etc.)

A CPA is a good way to go.

I'd also suggest, before selling the home, that you pull out some of the equity through a HELOC.  Since this is a loan and not profit, you won't pay taxes on it, but be careful not to open too large a HELOC so that you don't go upside down on the home.

Answer 3

Not necessarily - depends on how much profit you made...check out the following language:

$250,000 Exclusion on the Sale of a Main Home

Individuals can exclude up to $250,000 in profit from the sale of a main home (or $500,000 for a married couple) as long as you have owned the home and lived in the home for a minimum of two years. Those two years do not need to be consecutive. In the 5 years prior to the sale of the house, you need to have lived in the house for at least 24 months in that 5-year period. In other words, the home must have been your principal residence.

You can use this 2-out-of-5 year rule to exclude your profits each time you sell or exchange your main home. Generally, you can claim the exclusion only once every two years. Some exceptions do apply.

Answer 4

The last answer does not make any sense. The profit/loss on the sale of your home has nothing to do with how much equity you have in your house.

The other answers are correct. You will owe taxes on any profit above the $250/500K exclusion regardless of what you do with it.

Answer 5

What you do with the money has nothing to do with the tax consequences. Income is income. You should read up on the regulations concerning capital gains tax, and if you still have questions after, consult your tax professional..

Here’s some info: http://www.bankrate.com/nydn/itax/tax_ad...

You can Google for more.