Watch Out For Capital Gains when Selling Your House
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- Опубликовано: 27 сен 2024
- Are you a home seller looking to take advantage of the current housing market and sell your house? Please understand selling your house could cost you more than you think when it comes to capital gains taxes. At the moment, there are a lot of home sellers that don't understand how the capital gains exemption works and that could end up costing them a lot of money. In this video, we discuss real estate capital gains in more detail as well as how to avoid them and what you can do to avoid have to pay taxes on your home equity.
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Jeb Smith (huntington beach Realtor/orange county real estate)
DRE 01407449
Coldwell Banker Realty
➡I N S T A G R A M ➳ / jebsmith
#sellingahouse #capitalgains #realestate
Avoid capital gains, write off:
Expenses to write off.. commission to real estate.
Home improvements on property
We need to End captial gains tax
Unfortunately, Biden plans on increasing capital gains tax by almost 100%.
The percentage relative to overall net worth is outrageous. Bought the house in 2002 for $370,000 and sold it in 2024 for $1.5 million. I was primary bread winner (wife stayed home to raise kids) and we lived basically paycheck to paycheck for 22 years. The house is most of our retirement less some meager 401K. We still did well and we're thankful but paying what may amount to $100K is a huge hit.
@@sgtelias22582:30
All you have to do is live there for 2 years. It cuts down on house flippers inflating market prices. It's not a bad thing.
@@sgtelias2258you're still making a 1.13 million in profit lol. You'll be ok.
video starts at @1:50
This $250K/$500K exemption was created in 1997. How come there are no discussion to raise the amount, given prices/profits have gone up since then with inflation and everything else? The exemption should be $400K/$800K or even higher, correct? Great video!
Actually, from what I heard, Biden is trying to lower that exclusion
The government wants your tax dollars - they have bills to pay
I assume that it hasn’t been raised because it is possible for homeowners to deduct the adjusted basis of their house from the sale amount before having to consider the exclusion for home sales. Essentially, you won’t pay tax on the sale unless your house has appreciated by $250,000 or more since you bought it, and that’s assuming that you’re a single filer.
@@thegamsta7133 i inherited a house from my dad he bought it for 125k it has appraised for 350k do I pay taxes for that?? Please
@@carolmaplesden916 From what I know, when someone dies, the assets that they had receive an increase in basis up to fair market value. If that’s true in your case, the original purchase price of $125,000 is essentially increased to the $350,000 appraisal amount. If that happens, then you shouldn’t have to pay taxes if you eventually sell it for the appraisal amount. Taxation is always tricky, though. I’d encourage you to try and do some additional research yourself. From what I’ve seen, money received from inheritances is usually tax free for spouses or children.
How come a married couple only gets $500,000 exclusion, still? This exclusion is over 20 years old and not increased with inflation. Gurrr.
Because they the Gov are thieves they have all the write offs while we are stuck at 20 years ago!
I retired 20 years ago at 45. I didn't have a ton of cash. I've funded my retirement by buying a dump in a decent area and after 5-7 years fix it up, sell, repeat. It's fun. I've used the cap gain exclusion each time and keep an eye on value to make sure I never exceed the exclusion. This didn't just save me on income tax. This has kept my reportable income near zero. That qualifies me for Medicaid which I love because it's so easy. Also for LifeLine which provides a smartphone and data plan. Sweet. Plus I never have to even file any Federal or State income forms so April 15 no longer means anything to me. Yup, even when you sell a house and your cap gain is below the exclusion there is nothing to report. You still could get audited and have to show whatever the IRS wants to see. But as long as you didn't cheat you're golden.
There are a couple ways to get around this. If moving to be closer to your job is one way.
Another cool thing is you can own a property with partners and every partner is entitled to the cap gain exclusion. So say 3 single people go in together on a house which they all live in for 2 years and sell for a $600k profit so each gets $200k. Each of them can take the $250k exclusion. The exclusion is for the cap gain on a primary residence.
Great explanation.
Thanks! Awesome info!
Way to game the system! Obamaphones!
@@emcee6152 Hahaha....so typical. The Lifeline (free phones) program was created by Ronald Reagan. But sure, it's more fun blaming everything you don't like on Obama.
@@MrWaterbugdesign The first recipients of the smartphones were the ones to coin the term "Obamaphone." Regan did create a landline program, but Obama funded it in 2009 to the tune of 10+ Billion and expanded it to include Smartphones and plans. Hey, I'm not hating on the players, I'm hating the Game, and most politicians on both sides of the aisle. Take advantage of all you can get. The faster we can bankrupt this corrupt government, the better it will be for all of us in the long run.
Thank you so much! I have been trying to find a video that explains this and things for sellers. There are not enough videos for first time sellers.
Glad it was helpful!
In literally closing on selling my home in a few weeks and I have been trying to research this so I know how much I can sock away.
Well if your self employed and are over 50 and have a solo 401k you can put up to 64k in your 401k to offset your capital gain.
give an example for non primary residence and how much money comes to pocket after taxes
Great video! With all the equity people have built up, sellers need to be aware of this! I’m currently looking to sell my rental in MO but will be discussing with my accountant first to see what taxes will look like.
Thank you.
Whatever the taxes are I can assist you with them, doesn't matter the amount.😊
I appreciate you sharing your knowledge, extremely informative and helpful.
Can you make a video on all the layoffs happening in the mortgage industry due to refinancing/homes sales plummeting? My friend who’s a loan processor was sadly laid off along with others. I’m seeing reports that his is happening across the country.
In brighter news, where I live ( Utah ) I’m seeing a lot more inventory hit the market and I’m also seeing price cuts between 25k-75k! I’m also seeing homes that were under contract, hit the market again. Im loving what I’m seeing! 🥳
There's definitely going to be layoffs in the mortgage industry as refinance business drys up, no question. Good news on the inventory.
Those salt lake prices look crazy high sheesh
This is sooooo informative and educational! Thank you for this! 😊
You covered all my inquiries. Thank you.
So, it may be advantageous to track value appreciation of your property and sell as it approaches exemption limits, provided you are out of the two year obligatory period? 🤔
"I'm not a CPA"
"But here's some tax laws I have no authority talking about...."
Thank you. I am going to rewatch. I am a senior and my house -mortgage free-was built in 2009 for $1.2 million. The lot was paid for way long before 2009. Today, I think I can sell it for $2.6 million. I may want to do this within the next year and downsize--and buy another [smaller] house for $1.5 million. But will I get hammered by capital gains?
Really good and important video
Great info man thank you
No problem 👍
Love all your educational videos! Would love to be in your team!
Very informative video.
How about in a scenario where you occupied your home for two years, the then rented it for two years, and then sold the property prior the five year mark. Does renting Your home during the five year window subject a portion of your gains to taxes even though you’ve occupied it as a primary for two out of the last five years? Thank you!
Nope, you should be good.
@@JebSmith thank you Jeb.
2 year exclusionary clause.... aka, "serial flipping." Power wealth building tool!!
Jeb, thanks for covering this topic. Imo it would be constructive to discuss, perhaps in another video, the Medicare stealth tax that can descend on people who make capital gains beyond certain thresholds. The extra premiums fall into a category named IRMAA. A homeseller can find himself (herself) having to pay $559/mo instead of the customary $174.70. Planning can mitigate the liability, but probably not eliminate it.
So True yearly income over 180k married from house sell pushes you to 559$ they look back 2 years, so sell before 63.
Using taxact software we reported the sale of our primary residence in 2020 on our 1040 Federal taxes. We met the eligibility for ownership & length of living in home for over 2 years of the previous 5 as well as the look-back clause. Now 4 years later we are in a new state and our previous state did an audit without any notice to us for over 7 months since the audit and they're saying we owe 5% of the total sales price without using any other figures from our cost basis or even our net gain. Talk about a nightmare, I wish I paid someone to file for that year on our behalf because now I have to appeal everything and try to either file an amendment or have them audit us with the proper complete figures from the sale and we know for a fact we don't owe anything but have to prove it to them somehow. Full disaster, I have been feeling pain in my chest and shortness of breath because this is so stressful to think we may owe over $18,000 because they didn't do any due diligence to see if we had a real capital gain or not
Oh my.... selling a home and hadn't even thought about capital gains. Ugh
What about inflation? I don’t think there was any mention about inflation. We have lived in our home for 20 years, and I would say that the largest chunk of return on our house is due to inflation of home values due to the great decrease in value of the dollar.
I understand the principal of capital gains and the writeoffs. What happens if you sell your house in one state that has no state tax and move to another that has state tax. For example, I am moving from Florida to South Carolina? I want to sell my home in Florida and then buy a house in South Carolina, do I have to worry about paying capital gains tax in South Carolina?
you will only pay capital gains when you sell a house one time for that particular property. The capital gains tax is a federal tax, not a state tax.
Thank for your knowledge !!!!
Thanks!😊
You're welcome!
I just moved in my house 3 months ago and may have to just face capital gains unfortunately as I'm already considering selling due to hearing gunfire just about every week since I've been here.
Sorry to hear that, that's not good. Where are you?
@@JebSmith upper marlboro md.
I had the same problem with my neighbor now I have a loud giant truck with no muffler next door
Did the house go up in value more than the real estate fee you will pay to sell your home? Those and other costs to sell decrease the sale value of the house.
Hey you grew your beard back since your last stream. Lol.
What if I own two homes at the time of the sale. But my home qualifies for a sales tax exclusion. I saw on the California website you can only own one home at a time
6:56 $275K --> $225K
Question what if you lived in the home for 3/5 years but then 5 years go by and lived there 3/10 years ? Then want to consider selling ?
This is a very clear explanation. Thank you!
Taxes are a 50ml and Two Gram Rummy
I thought you only had to pay capital gains if you sold the house in less than 2 years of ownership.
I did get burned this time around because I just started the remodel on my central Phoenix home when values took off. I never expected such a fast and large increase and I'm now almost $100k over my exclusion. Good problem to have. I had been planning to sell and move to SE Asia. So here's my plan...sell at the beginning of 2023, move and then I have 10-11 months to find a woman to marry which shouldn't be hard. As long as I'm married on Dec 31 2023 I can get the $500k exclusion. That should same me about $37k which will buy a house in some parts of SE Asia. Sweet. Kind of cool a spouse doesn't have to be a US citizen in order to file married jointly. She won't even have a SS number. Just attach a letter explaining. I love understanding laws and using them to my advantage. It's fun.
This is a joke right?
hahahaha, there's always a loop hole. It should work.
I can help you out with those taxes, if you'd like 😊
Does that mean I have to own property for 5 years? I currently lived and own my home for 2 1/2 years will I qualify? Thanks jeb enjoy your videos👍
How long do you get after the sale to put the money into another primary home?
Very quick and good information. Thanks 🙏🏽
Does it have to be “exactly 24 months” meaning if I paid cash for My Home on September 1st, 2022 and Sell it September 15th, 2024, do I have to pay the capital gains tax? I paid Cash, so I don’t want to have to pay taxes on the money, I already paid taxes on when the money was made.
What about 3 year period
the exemption has bee $500 K FOREVER its way past time to adjust that number to $1 MM based on a inflation adjusted alone or go back to the prior to 1997 code come on Congress !!
Agreed!
What if you haven’t lived in the house, can you take the earnings and put it toward you’re current residence?
when the house i inherited from my dad sales who do I go to to get tax advice what taxes do I owe
But in order to qualify for the exemption of 500 or 250 do you have to purchase another house?
Are there additional exclusions from capital gains for medical reasons? My wife and I live with her mother who has dementia. My wife and I are moving but we have to bring her to take care of her. Is there an exemption that she can get on the capital gains when the mother sells the house? Other then the standard $250k and reducing the gains with capital improvements and real estate commissions. Thanks
We have a loan for $114k but our home is bow worth almost $300k. I feel like we need to get a new home because we dont have enough bedrooms now. Is there a way to just like... Switch our mortgage to a new property and keep our 3% interest? My husband is worried we will have to get a brand new mortgage with a way higher interest rate. Please help. I am desperate here.
Hi! What happens if you put 20% down added to the property and sold the house less than 2 years living there. Bought at 400k and sold at 415k are we only taxed on the 15k even if we get 80k back from our 20%?
in theory, yes you would only get taxed on the 15K but if you paid closing fees and commissions then chances are there is no gain.
Canada or US? I’m trying to get to the bottom of this in Canada. Thanks
This is US...........not sure of the rule in Canada. This is part of the US tax code.
Thanks for the info! I bought a property on my own income and loan (under my name but married) when I sell the house will my gain be taxed as single or married? Thanks for your help in advance!
Married. 👍
Thanks for your video is very informative. Sir, I have a question, I am planning to sell and buy also a primary home. I'm getting my income from SSI, how it's going to affect me? I'm calculating my profit after I sell and is going to be around 200-150,000. Please help me. Thanks 🙏👍
You can include the cost you had to pay when selling it? (As in….the 30k you pay to the realtor to get it sold)?? As part of your original cost basis?
One way getting around it is if you’re moving for a job. Is that ONLY if transferring a job or could it be for a brand new job with a different company?
Could be either.
@@JebSmith Thank You!
How many tax filings , do u need to file to be considered married .. 2 yrs tax filings ?
SAY I BOUGHT A HOME FOR $500,000 AND LIVED IN IT FOR 2 YEARS THEN SOLD
FOR 1 MILLION....I WOULD NOT GET THE $250,000 TAX BENEFIT??____BUT___
SAME SCENARIO LIVED IN IT FOR 2 YEARS (but then moved out) AND WAITED 3 YRS
TO SELL WHILE LIVING ELSE WHERE____I WOULD THEN GET THAT $250,000 TAX
BREAK??
SAY I AM THE OWNER OF A HOME THAT I HAVE RENTED OUT FOR THE LAST 10 YRS
THEN MOVED INTO THE HOUSE FOR THE NEXT 2 YEARS____THEN SOLD_____WOULD
I NOW GET THE $250,000 BENEFIT?? (or would I have to wait 3 more yrs)
The capital gains tax exemption qualification doesn't depend on you living somewhere else for a certain period before selling. The IRS states that you must have lived in that home for at least 2 of the 5 years leading up to the sale to qualify for the $250,000 tax exemption ($500,000 if married and filing jointly). In both scenarios you've mentioned, you would qualify for the tax benefit, assuming you meet all other criteria.
Very informative! Thank you! If you’re single and make under 40k a year, do you still have to pay capital gains taxes on a house sale? I’m located in Rhode Island.
Yes, regardless of your marital status and salary, if you have lived in the house for at least 2 of the last 5 years before selling, you can exclude up to $250,000 in profit from your taxable income. If the profit exceeds that amount, you'd have to pay capital gains tax on that excess. However, it can also depend on your personal situation, so I'd recommend speaking to a tax professional.
@@JebSmith Thank you for responding!
Is this for every state cuz we live in Florida
Yes, all states
Be careful on adjusting the base with "improvements". Buying new carpet 5 years before you sell wouldn't be considered an improvement. New roof years before a sale, probably not.
I'm not an accountant but I disagree with that.........my understanding is any improvement you've done to the home can be added to that basis.
@@JebSmith The way to know is to call the IRS and speaking with an auditor. It's free and they seem happy to discuss these types of things. It does take a long time to get shuffled around to reach an auditor.
A more extreme example...say you own a house for 40 years. In that time you replace the carpets 3 times. Is that maintenance or an improvement? Good luck telling an auditor those first 2 installs were an improvement. The last install was done 15 years ago and is now looking terrible....improvement? Or the 3rd install was done a couple weeks before listing to sell? OK, that's clearly an improvement.
There is a reality here is that this all comes down to opinion. My fav conversation with an auditor waa she said "Do you think it's an improvement?" I explained a little more and she repeated slowly "Do yooooou think it's an improvement. What she was trying to tell me without coming right out and telling me is the IRS is probably going to cut you some slack, They really aren't wanting to climb into every detail and get every dollar they "might" be entitled to. Auditors are looking for the clear thieves.
What if we are selling a commercial building that has been our private residence for over 10 years? We did have it zoned as residential a few years ago with the county property assesors office. What would be our capital gains scenario? Thank you :0)
Hi..., I am in Pheonix, AZ. Do capital gain tax apply to mobile homes...? I bought the MH 4yrs ago and have been paying the taxes on it, the thing is... That I had a problem getting the title transferred to me for the longest time. I FINALLY got the title transferred 6 months ago and now I'm selling the MH at a nice profit. The land is leased at $600, and I was a private buyer that bought from a private seller... I already bought another home in FL. 4 months ago and plan on moving there when this is sold... Can the Capital G tax (if any) be deferred to the new home...??? I am unemployed. 56yrs old. And these are primary residents for me... It does show on the community lease that I have been here since 2017, but the tax office has the previous owner on their records paying the taxes up until 2021... Am I screwed...😣
WORRIED...😓
I am planning on moving to the next town over in the next few years, but I can't just sell my current house and be homeless until a place I like pops up (I don't want to rent because it might be a few years until I find the right place to buy). So if I buy a new place and start living there right away, I essentially have nearly three years to sell my current house to avoid capital gains on it?
Yes, that's correct. As long as you lived in your previous home for at least two of the last five years, you can sell it and exclude up to $250,000 (or $500,000 for a married couple) of the capital gains from your income. This is called the Section 121 Exclusion. I'd recommend you speak with a tax advisor to ensure you meet all qualifications.
He forgot to mention that if you rent your house out at any time. Than you lose all capital gains if you end up deciding to sell.😉
Hi @jayb.8460, you make an interesting point, and you're correct that in the US, renting out your primary residence does have an impact on capital gains exclusion when it comes to selling. However, this may not entirely eliminate the capital gains exclusion, depending on the length of occupancy and rental period. If you have lived in the home as your primary for 2 of the last 5 then you should still be able to take advantage of capital gains. Of course, keep in mind that tax laws can be complex and it's always a good idea to consult with a tax professional. Thank you for watching and for your insightful comment, it's great to have such engaged viewers!
Are Capitol gains state taxed or just federal taxed🤔 and is it only on the gain and not your 250k?
Capital gains are subject to both federal and state taxes unless you live in a state with no income tax. And yes, it's only on the gains that exceed the $250k exclusion if single, or $500k if married filing jointly.
Is solar considered a home improvement write off?
I can't say for sure............I believe the answer to be yes but not 100%
what if I lived in the home 6yrs before owning it, because a relative passed, but then sell it 1yr after owning the property but lived in it prier to owning it J/W
You have to live in it as a owner for 2 of the last 5 ( at least that's my understanding)
OK thanks for the answer also another question. If you have the time if you're selling a rental house to buy a primary house do you have to pay capital gain on just the profit from what? You've sold it for or do you have to pay capital gain on everything?
Just say the percent
@jebsmith What if the individual doesn't have a SSN and only has an ITIN? Would these benifits still apply?
I'm assuming as long as you file taxes then it applies. That's a question for a tax professional.
So do you still have to file and tell the irs if you qualified for the exemption? When I sold, the title place mentioned sending the irs a copy of the transaction?
Why did you make this video if you’re not a cpa?
Because I know what I’m talking about
@@JebSmithyou could say, “CPA’s would agree with my research”
"Like property" just means real estate. So you can't sell a house and buy stocks. People get that confused
But a reit would qualify I think it is a real estate investment trust That you can buy on the stock market or there are companies you can buy straight from them I’m pretty sure
Thank you, this was the most simple and perfect way for someone to explain this subject. greatly appreciate it.
I would like you to address partnership and co-ownership. Not everyone is married. I have a situation where my daughter and I own our property together, We plan to sell our home and repurchase. Again; not everyone is married.
I got screwed on paying a capital gain on a rental home years ago I will never do that again they go off your income so the more money you make the more they take. I think I ended up paying like 50 percent
😢
I co-own a house with siblings. Which we’ve rented out. I would like to buy them out but I forgot about the capital gains. I’m the only one that lives in area. So I don’t think they’ll come to live in the house in order to sell it to me. We live in CA. Do you know roughly what capital gains will be?
What if you trade houses of equal value? How does that affect capital gains?
What about taxes if I transfer to a trust? Is CA going to increase my tax basis?
The 2 out of 5 year rule confuses me. We’ve lived in the house for 4 years. Do we still qualify for the exemption?
yes.
Out of the last five years, have you lived there at least a minimum of 2 years? If it’s yes then you qualify.
Single: 2 years! Primary house
Married: 500,000, lived in 2 years!
plus whatever you have added to your cost basis in improvements........Bottom line, talk to a tax pro.
Very valuable and useful information, thanks.
thats why we need to be married and sell every 2 yrs
I feel like focusing on a $500,000 house and $1 million profit and all of that is not really a good example to help folks understand capital gains. If someone is looking to understand capital gains on RUclips they most likely are not profiting $1 million off of their homes. I think this would help more folks out if you use more realistic examples for instance someone selling a $450,000 home that they initially purchased for $400,000 and haven't paid it off.
Example you have a capital gain of 500k but only exempt for 250k of it. Couldn't we use the 1031 to buy a new primary home after the exemption limit if we can't deduct the balance that's left after the exemption? 🧐
How much housing inflation have we had since 1997? Many people might like to move, but $250k or even $500k doesn’t cover it. Greedy tax man.
Bought primary home at $185k...Put in $100k over 24 years....Married...Sold at $723,500......$185k + $100k =$235k......$723,500 - $285k = $438,500k....= No capital gains on sale of house? Correct?
Based on those numbers, correct.
@@JebSmith Thank You
We’re couples sold our primary home and wrote off 400k 6 years ago. Bought another primary home 500k and today price go up to 1m. My question: if I sell primary home now, do i have to pay capital gain or i can write off tax again? Thanks
I was told you can only deduct all upgrades, repairs and additions that was done to the house 90 days prior to listing the house for sale? True or False?
Bougth land january 2022 i start building my house finished house feb 2023 till now march 2024 is that count as 2 years living ?? Since start building
No, the count usually begins from when you start living in the finished house, not when you started building it. So in your case, it would count as a little over a year.
Hello. I live in Arizona and about 2 years ago I turned it into a rental property and its being rented ever since. Before it was rented, I lived in it for 2 years. I plan on selling this place next month. Do I still qaulify for the 2 out of 5 rule although the property has been being rented for the last 2 years?
If you want to avoid capital gain you should refinance 1st to take some equity out and than sell it
2 out of 5 Rule BABY WOOOOOOP
💯
Does it have to be exactly two years down to the day I'm trying to sell my house and I'm shy about three months of the two years but I've been living there for about 10 years as my primary residence it was a rental I just bought it paid $18,000 cash put about $70,000 just in plumbing electrical ... Plus another I'd say $30,000 in siding windows.. biggest concern is when I sell the house do they automatically take the capitals gain out right away or do I owe it later. I live in Michigan please help. I passed all the real estate questions except for living there for two years exactly.
yes it needs to be 2+ years. Otherwise you will need to pay capital gains. They will prorate it for the time that you have lived there but there will still be taxes unless your improvements are more than the gains. Talk to a CPA.
For $500k exemption, does it matter if both spouse’s names are on the mortgage or not or do they just have to file as married to qualify?
Just have to be married
what paperwork clarifies that youve lived in it the past 2 of 5 years?
The IRS looks at various documents to confirm residence for the past 2 out of 5 years, such as tax returns, voter registration, driver's license, car registration, bills, and insurance records. However, there isn't a specific single document that proves this. It depends on a combination of these factors.
Can you make a video with Capital Gains (TX) for a rental for 10 plus year for military personnel station at another location. A lot of these videos are made for civilian personnel. Thanks again!! Great Videos!!
ruclips.net/video/zLdpRNPbT3s/видео.html
Good information ℹ️
thank you for information 🙏
You're very welcome, @bikramsingh3198! I'm glad you found the information useful. If you have any more questions, feel free to ask. It's always my pleasure to help.
You are so helpful 🙏