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Pollypig · Jul 12, 2007, 06:31 AM

Hello-
My husband and I have an oppurtunity to sell our home and pay off all of our debt and still have a little saving left over. We were going to move into my parents home and they are moving into there 2nd home. We are going to just take over paying the utilites while we are there. Its an oppurtunity to save money for 2 years and then possibley purchase the house from them or go elsewhere. My only concern is that we purchased right before the market stated getting high so we got a good deal on our house and our interest rate was 5.2%. My concern is we will be able to get back into the houseing market like we did come 2009-2010 and how will this affect our taxes come tax time. NOT sure if making the right move with this. HELP!

excon · Jul 12, 2007, 06:46 AM

Hello Polly:

You asked a very good question, but gave us no numbers or facts with which to figure out an answer. It isn't a guessing game. It's an arithmetic problem.

excon

CaptainRich · Jul 12, 2007, 07:04 AM

You're going to want to consult with a tax professional. I've always understood that if you sell real estate and don't reinvest something, you will be taxed on the capital gain.
Any experts on this? I plan to sell in a couple of years, too.

excon · Jul 12, 2007, 07:19 AM

Hello again:

I think we DO have a few experts around. I'm not one of them, but I sure do have an opinion. Before I lay it on you, however, I think throwing out SOME financial planning information (like this is) won't really be helpful without taking in to consideration your ENTIRE financial picture.

Having said that, here's what I know. Taxpayers are entitled to a one time exemption from capital gains resulting from the sale of a primary residence. I don't know how much it is - maybe $250k. The purpose for this is so that people who have their entire life savings invested in their house, and who are planning to retire on that money, won't have the government take a bunch of it. I don't know about you, but I'd save my one time exemption.

If a taxpayer doesn't want to take his one time exemption, he may purchase another primary residence within 2 years (I think), and NOT be subject to capital gains.

That's what I know - and it ain't much.

excon

Pollypig · Jul 12, 2007, 11:33 AM

We purchased the house for 200... mortgaged 180 @ 5.2% for 30 years fixed... have a home equity of 30,000... so after everything we walk away with 50,000 and no debt. We have 2 years to stay at my parents house and save money. Both my husband I work and bring home about 70-100 thousand. My parents home is currently worth about 310,000.

excon · Jul 12, 2007, 01:20 PM

Hello again, Polly:

Financial management by piecemeal ISN'T the way to go about it. When I said your ENTIRE financial picture, that's what I meant. You gave me a teency weency bit of information. It's really hard to give an accurate answer...

However, I'll give it a shot. Right off the top, you lose your interest deduction, and if you don't buy within 2 years you lose your capital gains exemption.

I estimate you annual interest payment to be about $10K. With an income of $70-100K, I estimate that you're in a 30% tax bracket. According to my calculations, it's going to cost you $3,000 right off the top. That's not saving anything.

Given the scarcity of data, I wouldn't be able to give you a definitive answer to your question. You need the services of a financial planner, really.

excon