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Posted by Bill on March 21, 2008, 10:57 pm
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babyrump@gmail.com (babyrump) posted:
>In 2007 we sold our house that we lived in for
>ten years(our only property) and I am having
>difficulty determining if the proceeds are
>taxable. We owed about $ 100,000 on our
>mortgage and we sold the the house through
>a real estate agent for $180,000. We moved
>into a house that my father-in-law built and we
>had a lease option to buy. We had made a
>deposit on the house of thirty five thousand.
>We have since decided not to buy the house
>that we have the option on but have instead
>decided to invest in a house built elswhere in
>the future. Is the proceeds from the sale of the
>house taxable? Is it taxed on the total
>proceeds or the amount of the settlement after
>fees and commissions and buyer requested
>improvements(new roof)? Any help would
>much appreciated,
Simple answer: There is no tax on the proceeds from the house you lived
in for ten years and sold for $180,000. That's because up to $250,000
_gain_ from the sale of your home is non-taxable ($500,000 if MFJ).
There's also no reporting required.
What you do with the proceeds is unimportant. I believe you're confused
by the "old" rules which required reinvestment into another home in
order to avoid taxation. Since about 1997, the tax law has been as
cited above. The only requirement is that you have lived in the house
as your "main home" for at least two years.
Furthermore, you can start the process over again when you purchase the
next home. Two years later with the same stated conditions, that would
qualify for the same treatment: no taxes on up to $250,000 ($500,000 if
MFJ) -- and no reporting required.
Bill
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