Ask Experts Questions for FREE Help !
Ask
    woostm's Avatar
    woostm Posts: 1, Reputation: 1
    New Member
     
    #1

    Jul 24, 2007, 03:00 PM
    Tax on house sale profit
    We own a house in Pennsylvania. It is our only hose and our family home. We bought the house in Sept 2006. If we sell during 2007 will we have to pay US tax on any profit? What happens if we make a loss - is this tax deductable?:
    ebaines's Avatar
    ebaines Posts: 12,132, Reputation: 1307
    Expert
     
    #2

    Jul 25, 2007, 05:53 AM
    Yes, and no. Given that the home is your principal residence, if you live in it for at least two years (out of the previous 5), you are exempt from paying capital gains on up to $500K in profit when you sell the house. But since you just moved into the house in 2006, if you sell in 2007 (i.e. prior to reaching the 2-year anniversary) you will owe capital gains taxes on any appreciation. So it all depends on the timing of the transaction.

    However, if you have a loss on the sale of the home, you cannot claim the loss. That may not seem fair, but it's done this way because the house is considered personal property, not investment property.
    ebaines's Avatar
    ebaines Posts: 12,132, Reputation: 1307
    Expert
     
    #3

    Jul 25, 2007, 02:07 PM
    I should have also noted that even if you sell the house prior to the 2-year anniversary, you may still be eligible for a tax break. If you sell because of certain circumstances such as change of job, change of health, or other unforeseen circumstance such as divorce, you can take a pro-rated portion of the $500K exclusion. For example, if you sell the house after 1 year due to one of these reasons, you don't pay taxes on the first $250K of profit (assuming married filing jointly).
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,834, Reputation: 846
    Senior Tax Expert
     
    #4

    Jul 27, 2007, 10:51 PM
    Ebaines has covered all issues.

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

House sale profit [ 2 Answers ]

My wife and I are expecting to make a decent profit from the sale of our 1st house. We are separating so we will not be buying another house anytime soon. What kind of taxes/penalties should we expect to pay in order to pay off bills, split the profits, etc?

Different size down payments-splitting house sale proceeds -- VA [ 4 Answers ]

My (former) girlfriend and I are joint owners of a house in VA. I made a much larger down payment, but the title/deed does not specify unequal ownership. The relationship is now so unpleasant that I want to sell it, probably at a loss. How will the (losing) sale proceeds be split between us,...

Landlord putting house up for sale before end of lease [ 8 Answers ]

I entered a 1-year lease on 3/1/2007. I was informed by a realtor on 6/4/07 that the house was going up for sale but not to worry, it might take months for it to sell... Can a landlord do this? Even if the house takes a year to sell, how about my right to enjoy a quiet environment (for sale...

No Lien, but can creditors come after house sale proceeds? [ 10 Answers ]

Hi- hope someone can help. Can't get a straight answer from my lawyer! My mother passed in 2004 with a large $20,000 hospital bill. They did drain their savings to pay about 25,000 of it! My dad had been making payments on the balance until he got sick. My dad died last March. He willed the...

Enrichment? House sale [ 1 Answers ]

My perents got a legal separation and so that my mother can live by herself she they are about to sell a 5 familly house in brooklyn. They bought this house about 10 years ago and for the past 7 we have owned it but have rented out the apartaments and have not lived in it ourselves. We own and have...


View more questions Search