Archive for the ‘tools’ tag
Self Builder
Selling our primary residence with a gain of one million dollars total. How can I figure my tax liability?
Total cost is 200,000. We are thinking of a sale price of 1.2 million. Live in Massachusetts. Husband is Sch C self-employed builder. We might buy land and build our next house so can we deduct the materials on the next house in this year too, giving a net loss?
Assuming the figures you gave, your gain is $1 million. You get a $500,000 exclusion if you lived in it as your principal residence for 2 of the 5 years prior to the sale. In that case, you’d have a taxable gain of $500,000. This would be treated as a long-term capital gain and would generally be taxed at 15%, though there are occasional exceptions to that.
The fact that you are buying or building a new home is a totally separate issue and has no impact on the tax on the gain on the sale of your residence. The cost of the land and construction materials would figure into the basis for the new home but have nothing to do with the sale of your current home what so ever.
The two respondents who mentioned rolling over the gain into your new home are 10 years out of date. Ignore them. The old Rollover Replacement Rule was replaced with the current exclusion in 1997 if memory serves correctly. It was only a deferral on the taxation of the gain. The current rule is a full-fledged exclusion from tax that you can exercise once every 2 years.
The other comment is from someone who doesn’t realize that there are a fair number of us here who DO know what we’re talking about. If you follow up what I’ve posted here with the IRS you’ll discover that it’s correct information. Specifically, get a copy of IRS Pub 523 http://www.irs.gov/pub/irs-pdf/p523.pdf and all will be revealed to you.
HOW TO MAKE A SELF-BUILD MOTORHOME – PART 1