Is this real? Obamacare tax on home sale profits over $500K

nosuchreality said:
That certain amount of money is $250K.  So if you're selling a house for $500K profit, that means you.
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So what you are saying is that since you are selling a house with a $500K profit, you will pay the additional tax even if your 'regular' income is nothing or a 'regular' income, right? 

On another tangent, so for people who paid all cash a few years ago (FCB) and had no mortgage, when they sell their condo or home for an asking price of $500K+ or more (most of OC),  they would be hit with the additional tax since the full sales amount (minus realtor fees, etc) would look like income?  That does not sound right.  Or do they look at your purchase price and subtract that from your sales price to determine income/profit?  I know I must be oversimplifying or mistaking how the IRS identifies 'income' on the proceeds of a home sale.
 
I believe the rule is if your single, anything over $250k over your basis (original buy price) is taxable (that's $500k if you're married).

So if you bought a home for $500k and are selling it for $700k ($200k over), you are okay, if you are selling it for $800k ($300k over), then you will be taxed on $50k (not on $300k or $800k).
 
irvinehomeowner said:
I believe the rule is if your single, anything over $250k over your basis (original buy price) is taxable (that's $500k if you're married).

So if you bought a home for $500k and are selling it for $700k ($200k over), you are okay, if you are selling it for $800k ($300k over), then you will be taxed on $50k (not on $300k or $800k).
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Ok, so if you take the hypothetical situation you are married and you owned your first house (primary residence) and then sold it and made $499K profit.  You then bought your second home for $500K (new primary residence) and rolled in the profit from your first house ($499K) into the purchase of it and paid $1k out of pocket.  When you sell your second home at a profit three years later, (let's say $400K profit), the IRS will look at the difference of your purchase price $500K minus your sales price of $900K and show you only made a profit of $400K and are exempt from Cap gains and the Obamacare tax?  They wont take your original profit from the first sale into account as 'profit' ($499K + $400K = $899K profit) in the second home sale correct?
 
davenlei said:
I know I must be oversimplifying or mistaking how the IRS identifies 'income' on the proceeds of a home sale.
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the profit on your house is your sales proceeds - less sales expenses - less your homes tax basis (purchase price, after market upgrades, etc).
 
@davenlei:

I believe each transaction is separate. The old law used to let you skate on capital gains tax as long as you rolled your "profit" over into a new residence but I think they changed that when they created the $250k/$500k limit.

Maybe a realtor or accountant can help us out here.
 
irvinehomeowner said:
@davenlei:

I believe each transaction is separate. The old law used to let you skate on capital gains tax as long as you rolled your "profit" over into a new residence but I think they changed that when they created the $250k/$500k limit.

Maybe a realtor or accountant can help us out here.
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I am not planning on selling anytime soon but it would be good to know what we are all up against potentially in the future when/if we decide to sell.
 
Tyler Durden said:
davenlei said:
irvinehomeowner said:
@davenlei:

I believe each transaction is separate. The old law used to let you skate on capital gains tax as long as you rolled your "profit" over into a new residence but I think they changed that when they created the $250k/$500k limit.

Maybe a realtor or accountant can help us out here.
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I am not planning on selling anytime soon but it would be good to know what we are all up against potentially in the future when/if we decide to sell.
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if you are worried about it, don't sell until you are 55 or older, and you are exempt from capital gains on a one time basis.
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For now.  Who knows what the laws will be when/if the Govt. IOU's come due.
 
davenlei said:
irvinehomeowner said:
I believe the rule is if your single, anything over $250k over your basis (original buy price) is taxable (that's $500k if you're married).

So if you bought a home for $500k and are selling it for $700k ($200k over), you are okay, if you are selling it for $800k ($300k over), then you will be taxed on $50k (not on $300k or $800k).
Click to expand...

Ok, so if you take the hypothetical situation you are married and you owned your first house (primary residence) and then sold it and made $499K profit.  You then bought your second home for $500K (new primary residence) and rolled in the profit from your first house ($499K) into the purchase of it and paid $1k out of pocket.  When you sell your second home at a profit three years later, (let's say $400K profit), the IRS will look at the difference of your purchase price $500K minus your sales price of $900K and show you only made a profit of $400K and are exempt from Cap gains and the Obamacare tax?  They wont take your original profit from the first sale into account as 'profit' ($499K + $400K = $899K profit) in the second home sale correct?
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You can't defer tax on realized tax gains via a 1031 for primary residences (above the $250k/$500k exemption amounts), only rental/investment properties. 
 
Not true.

Law changed. You don't defer gains any more. You can get 500K per house in tax free gains for a married couple on a primary residence every two years.

If you are 55 or older you can take your old tax BASE with you. Doesn't help with the mello tho.
 
My last primary residence I lived in for several years now rent out for almost a year. I'm thinking of selling if prices are good in the near future. Will this still count as a primary residence even if I don't live there anymore?
 
Toutdesuite said:
My last primary residence I lived in for several years now rent out for almost a year. I'm thinking of selling if prices are good in the near future. Will this still count as a primary residence even if I don't live there anymore?
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To qualify for the gains exemption, I believe the following are still true:
1. You must have owned the property at least 2 out of the last 5 years. (ownership test)
2. You must have occupied the property at least 2 out of the last 5 years. (occupancy test)
(the 2 years do not have to be concurrent, but can overlap)
3. If you're a single individual, you can be tax-exempt for the first $250K in gains. If you're married, the exemption is to $500K.
4. You can only exclude it if it was your "main" home during those periods.

IRS link is here.

-IrvineRealtor
 
IrvineRealtor said:
Toutdesuite said:
My last primary residence I lived in for several years now rent out for almost a year. I'm thinking of selling if prices are good in the near future. Will this still count as a primary residence even if I don't live there anymore?
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To qualify for the gains exemption, I believe the following are still true:
1. You must have owned the property at least 2 out of the last 5 years. (ownership test)
2. You must have occupied the property at least 2 out of the last 5 years. (occupancy test)
(the 2 years do not have to be concurrent, but can overlap)
3. If you're a single individual, you can be tax-exempt for the first $250K in gains. If you're married, the exemption is to $500K.
4. You can only exclude it if it was your "main" home during those periods.

IRS link is here.

-IrvineRealtor
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One more thing to add: above is true for Federal income taxes not CA state income taxes.
 
Beware the big curve ball the IRS tossed in there several years ago.  "Non qualified use" reduces the exemption proportionally to the amount of time after 1/1/2009 the property was not the primary residence.

E.g., if you lived in the property 4 out of the last 5 years, with it being a rental this last year, you can only exclude 80% of the gains on the sale.

At least, that is how I am interpreting Pub 523.  If this is true, it will cost me $$$ and I am not a tax guy, so I would love to be corrected by someone with a professional understanding of the subject.
 
I hope that's the case, but can you point to any IRS docs that support that?  The 2013 pub isn't out yet.  I can't imagine "confusion" being ever being a criterion for re-writing tax code! 
 
daedalus said:
I hope that's the case, but can you point to any IRS docs that support that?  The 2013 pub isn't out yet.  I can't imagine "confusion" being ever being a criterion for re-writing tax code! 
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The link that I'd listed above is directly from the www.irs.gov website and states that it was last reviewed/edited 3/12/13 at the bottom of the page. Hopefully that's sufficient?

-IR2
 
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