Need advise from real estate guru or CPA?
I know in order not to pay tax on capital gain on residential property, you need to live in it as a private use 2 out of 5 years. IRS, also stated that you may still qualify for tax benefit if you meet certain conditions if you sale the property before the 2 year minimum requirement that the captial gain tax will be prorated.
Currently, I am in the process of down grading from single family home that I purchased about a year ago into a townhome due to the growing expenses with my first newborn baby girl
. My main goal is to lower my montly expenses and continue to have a comfortable living condition and provide whatever I can to my family.
I have put in a contract for a new construction TH near by where I currently live which will not take delivery of the new TH until Oct 05. I will be planning to put my single family on the market in mid or late Aug 05. I figured that I will have a gain of 150k after all other expenses pay relate to the sales of the house. By the time that I finishs this transaction, I will have lived in the SF for roughly 18 months. If I am able to meet the special condition rules set by the IRS I would only pay 25% of the 150K profit that I gain from the sales of the house.
The reasons to down grade
1. The SF is to big for the 3 of us.
2. big mortgage
3. expense to upkeep the house is high (my energy bill is between 500 to 700 each month during this winter)
4. child care expense, life insurance, education funds.
5. car payments
6. student loan
7. not able to save money for future
8. living pay check to pay check
Benefit down grade to the TH
1. 100k less mortage
2. expense to upkeep the TH is much less
3. all car payment will be paid off
4. no more student loan
5. wife can decide to stay home or continue to work
6. continue to save money for the future
7. no more living pay check to pay check
I wonder with the stated the condtions from above, will I meet any of the requirement? or How?
Thanks for your advises
I know in order not to pay tax on capital gain on residential property, you need to live in it as a private use 2 out of 5 years. IRS, also stated that you may still qualify for tax benefit if you meet certain conditions if you sale the property before the 2 year minimum requirement that the captial gain tax will be prorated.
Currently, I am in the process of down grading from single family home that I purchased about a year ago into a townhome due to the growing expenses with my first newborn baby girl
. My main goal is to lower my montly expenses and continue to have a comfortable living condition and provide whatever I can to my family.I have put in a contract for a new construction TH near by where I currently live which will not take delivery of the new TH until Oct 05. I will be planning to put my single family on the market in mid or late Aug 05. I figured that I will have a gain of 150k after all other expenses pay relate to the sales of the house. By the time that I finishs this transaction, I will have lived in the SF for roughly 18 months. If I am able to meet the special condition rules set by the IRS I would only pay 25% of the 150K profit that I gain from the sales of the house.
The reasons to down grade
1. The SF is to big for the 3 of us.
2. big mortgage
3. expense to upkeep the house is high (my energy bill is between 500 to 700 each month during this winter)
4. child care expense, life insurance, education funds.
5. car payments
6. student loan
7. not able to save money for future
8. living pay check to pay check
Benefit down grade to the TH
1. 100k less mortage
2. expense to upkeep the TH is much less
3. all car payment will be paid off
4. no more student loan
5. wife can decide to stay home or continue to work
6. continue to save money for the future
7. no more living pay check to pay check
I wonder with the stated the condtions from above, will I meet any of the requirement? or How?
Thanks for your advises
