DawgTalkers.net Forums DawgTalk Tailgate Forum When you sell you house....how does Uncle Sam figure the capitol gain?

Is it?

selling price - original price = profit (the they take 33% of that?)

Because, we were thinking about selling our home but we actually owe more than what it was worth (mostly due to using our LOC on fertility stuff in the past - which paid off with our little girl). How does it work in that situation?

And we're not over a ton.....enough to wonder how it impacts the result I guess.

Thanks in advance.

I don't know....I will have to ask a friend.

I know stock losses can be written off..done that a few times over the years....don't know why real estate losses couldn't.

Pegging the loss would be easy enough.

I'm sure no tax expert, so take it with a grain of salt here. I was under the impression that if selling a primary residence, there was no capital gains tax.

If you own multiple homes you could get hit with it, if you own a business you could.........but a primary residence? I don't think they can tax that.

You are right there.....but he is talking about a loss of equity....you won't pay tax on a loss.....he should be able to write-off the loss...reducing the overall tax burden.

Seems like $3000 is the threshold in any given year, with remaining amounts up to $3000 being able to carry over to subsequent years.

Not sure how many years you can carry the loss....

When selling the primary residence there is no capital gains tax provided you buy another house within a certain period of time, not sure what that is. If you sell it for a profit outright and then don't buy another house, you owe taxes.

As for a loss, I'm not sure. Especially since as I read his post, it's only a loss because he has taken equity out of it, not because of strictly because the price dropped.

Another good point

Well, let me put real numbers to the question...

Bought house for 390,000
Owe 400,000
Market "says" we can sell for 425,000 (but who knows with the current times)

Let's even say we sold for $400,000 just to get out.....We'd be breaking even on what we owe but not on what we bought it for.

We were thinking of renting for a year to offset the price of daycare ($1500/month in the city). We don't really want to buy another condo if we're going out to the burbs in 2 years.

Does that help?

Probably won't help you any, but capital gains are just that: gains.

What you owe has no bearing whatsoever, in my limited knowledge, based strictly on a buy price and a sell price.

Example: You buy a house for $100,000. You pay cash for it. You owe nothing. You sell if for $120,000 - you "gained" $20,000, which you may have to pay tax on, may not, depending on a bunch of other things.

Even if you owed $80,000 on the house, it still has no bearing and no effect on the "gains" portion. If that makes sense.

In that case you would have a 10k gain....basically you would have been borrowing against the gain.

You can't pull out equity or gain and not owe some tax...unless you reinvest the gain into another primary residence.

All that you need to know is the closing price on the home when you bought it then what you sell it for.

In your scenario, you profited 10k.

As long as you lived in the home for 2 of the past 5 years you can write off 250k of appreciation if you are single, 500k of appreciation if you are married.

So in your scenario you will not owe any taxes on the sale.

At this point, we're not really worried about losing profit (well that would suck for sure). We're more concerned about selling it near what we owe....and then owing the government based on what what we paid for it.

Even then, it's not like I'd lose any sleep over any loss. I just want to know what to expect. Ever since getting our dream answered, we don't sweat the small stuff as much (Browns loses still hurt for some reason . .

Thats because the loses are not small stuff

This is what I think I know about it.

As you explained it, you would owe taxes on $10K if you didn't buy another house. I think you have at least a year, if not longer to buy another house, so you might want to check on that.

Had you bought it for $390K and put $10K in upgrades/improvements in it that you could verify then your sales base would be $400K and you wouldn't owe any taxes if you sold it for $400K but just taking out equity doesn't count.