Originally Posted by Neens27
#1;I live in California. I own a home in Orange County that I have been renting for about 2.5 years. I have been living with my parents during this time and just put my home in OC on the market. My intention is to sell It (I have about $100k in equity) and purchase a less expensive home in north County SAn Diego. I have seen in other posts that there is a ones time exclusion, but don't know enough to know if I qualify. I am a single mother and I am currently on permanent SSDI.
Someone else told me that to avoid capital gains tax I would need to purchase a more expensive home. I don't know what is true. You are the expert. Can you please help and tell me whAt is what And exactly how I can get around paying a bundle of taxes.
#2:My intention is to sell It (I have about $100k in equity) and purchase a less expensive home in north County SAn Diego
#1;I assume that your home in OC is yur primary home(primary home: your primary residence, or main residence is the dwelling where you usually live, typically a house or an apartment. You can only have one primary residence at any given time, though you may share the residence with other people. A primary residence is considered to be a legal residence for the purpose of income tax and/or acquiring a mortgage.), then, in general, you are required to include the capial gain from the sale of your home in your taxable income. However, if the gain is from your primary home, you may exclude up to $250K as single ($500K for married couples filing jointly) gain from income, if you meet certain requirements. This is referred to as maximum exclusion. So as long as you sell your main home at a gain, and have lived in it for at least two years during the five-year period ending on the date of sale, you can exclude the gain from taxable income up to a maximum exclusion of $500K for married persons filing a joint return, and $250K exclusion for a single person.If the gain exceeds $250K, the excess amount must be reported on Sch D of 1040 or form 8949.In order to be eligible to exclude up to $250K, 1)you must meet the ownership and use test. Under this requirement, as mentioned above, you must have owned the home for at least 5 years, and have lived in it as your primary residence for at least 2 years. This two-year period must be within the five-year period ending on the date you sold your home. And 2) you did not exclude from your income the gain of a sale from another home during the two-year period ending on the date of the sale of the home for which the exclusion is being claimed.
If you shared ownership in the home, but you and the other owner file separate returns, you may each exclude up to $250K from your income, if you both meet the requirements listed above.
If you exclude the entire gain on the sale from income, the transaction is not reported on your tax return. If any part of the gain is taxable, you need to report the sale on sch D of form 1040/ form 8949.
#2;it doesn’t matter even if you are to buy less expensive home