Posted on: 10th Jan, 2006 09:21 am
a person owns 3 properties and want to sell them how can she avoid paying all this taxes from the profit on the properties.
Hi CECILIA,
Tax on the principal residence may be avoided by following the rules of Internal Revenue Code 121 where $250,000 as single and $500,000 for married couple tax free home sale profit is allowed.
James
Tax on the principal residence may be avoided by following the rules of Internal Revenue Code 121 where $250,000 as single and $500,000 for married couple tax free home sale profit is allowed.
James
Hi CECILIA,
Welcome to MortgageFit Forums.
I don't think one can avoid a tax on the profit from the proceeds of a sale of properties which are solely for investment purposes. In that case the capital gains rule will apply.
If the property is a principal residence, then you can get a tax relief as mentioned by James. The period of living must be at least two years within five years ending on the date of the sale. So, this is way you can look for.
There's is no limit on the number of homes that can be sold and have tax free profits ut each sale must be at least two years apart.
I hope, this information will help you.
Feel free to ask if you have any more doubts.
God bless you.
For MortgageFit,
Samantha
Welcome to MortgageFit Forums.
I don't think one can avoid a tax on the profit from the proceeds of a sale of properties which are solely for investment purposes. In that case the capital gains rule will apply.
If the property is a principal residence, then you can get a tax relief as mentioned by James. The period of living must be at least two years within five years ending on the date of the sale. So, this is way you can look for.
There's is no limit on the number of homes that can be sold and have tax free profits ut each sale must be at least two years apart.
I hope, this information will help you.
Feel free to ask if you have any more doubts.
God bless you.
For MortgageFit,
Samantha
What is meant by this long term capital gains?
thanks
thanks
Hi,
Capital gains can be taxed at 5, 15, 25 or 28 percent of rates and even may be on a combination of rates.
These different tax levels are called long term capital gains. They are applicable to assets owned for at least 366 days or more than a year.
It is usually much lower than what you pay on your regular income.
God bless you.
For MortgageFit,
Samantha
Capital gains can be taxed at 5, 15, 25 or 28 percent of rates and even may be on a combination of rates.
These different tax levels are called long term capital gains. They are applicable to assets owned for at least 366 days or more than a year.
It is usually much lower than what you pay on your regular income.
God bless you.
For MortgageFit,
Samantha
Cecilia,
Not only should they be concerned with capital gains taxes, if the properties were depreciated over the years they may also have to pay back that depreciation to the IRS. OUCH.
The way to avoid this is a 1031 property exchange. They can't take the cash out liquid, but they can roll the sale from 3 properties into the acquisition of a new income generating property. It is really important to talk with a CPA on this who understands the 1031 exchange forms and tax code specific to this area.
Only if you are selling a primary residence you have been living in for a certain amount of time can you sell it and avoid capital gains taxes up to the limits as explained by jameshogg above.
Not only should they be concerned with capital gains taxes, if the properties were depreciated over the years they may also have to pay back that depreciation to the IRS. OUCH.
The way to avoid this is a 1031 property exchange. They can't take the cash out liquid, but they can roll the sale from 3 properties into the acquisition of a new income generating property. It is really important to talk with a CPA on this who understands the 1031 exchange forms and tax code specific to this area.
Only if you are selling a primary residence you have been living in for a certain amount of time can you sell it and avoid capital gains taxes up to the limits as explained by jameshogg above.
