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    greenmtnate's Avatar
    greenmtnate Posts: 3, Reputation: 1
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    #1

    May 23, 2012, 04:50 AM
    Lived in my home for 1 year, Want to buy larger home. Will I pay taxes?
    I have lived in my current home for 1 year and would like to sell it to buy a larger home in the same town/state. I will most likely make a profit of $20k off my home and will re-invest every penny back into the larger home that I want to buy. Will I still have to pay taxes on the 20k from my first home even though I am re-investing all of it into a new home immediately? I live in the state of Massachusetts. Thank you in advance. -Nate
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #2

    May 23, 2012, 04:54 AM
    Was this your first home? Are you sure you will make that much of a profit.

    A homeowner is entitled to defer capital gains taxes on the sale of their primary residence under certain conditions. But I think one of the requirements is more than 1 years residency.
    greenmtnate's Avatar
    greenmtnate Posts: 3, Reputation: 1
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    #3

    May 23, 2012, 05:20 AM
    Quote Originally Posted by ScottGem View Post
    Was this your first home? Are you sure you will make that much of a profit.

    A homeowner is entitled to defer capital gains taxes on the sale of their primary residence under certain conditions. But I think one of the requirements is more than 1 years residency.
    Yes this is my first home, It's a town house that I purchased on an FHA mortgage and have lived in for 1 year, 2 months now. The home was a foreclosure/bank owned so I ended up getting it well under what it's worth hence the 20k of equity. Like I said previously, I will be investing every penny I make off it into the larger home I would like to buy. Hope this helps! Thanks again. -Nate
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #4

    May 23, 2012, 05:37 AM
    The exclusion only applies if you lived in the house for 2 of the 5 years prior to the sale.

    Capital gains home-sale tax break a boon for owners

    I'm not sure what the deal is for shorter term ownership so I'm moving this to our Tax forum for the experts there to advise.
    greenmtnate's Avatar
    greenmtnate Posts: 3, Reputation: 1
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    #5

    May 23, 2012, 07:16 AM
    Thank you Scott.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #6

    May 23, 2012, 01:29 PM
    Scott is correct - to qualify for the capital gains exclusion you must live in the home as your primary residence at least 2 of the previous 5 years. Accordingly you will have to report the $20K as a capital gain, and you will owe taxes on the gain. The capital gain tax rate is a flat 15% if you own the house for at least a year (i.e. it's classified as a long term capital gain). One other rthig - in reportung the sale be sure to account for all costs you incurred in buying and then selling the house, and also include in the cost basis any capital improvements you may have made - this will help lower the tax bite.

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