Sold house, now what?

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Sold house, now what?

LargeHadron: May 19, 2009; They say, "you mean it's just sounds?" thinking that for something to just be a sound is to be useless, whereas I love sounds just as they are, and I have no need for them to be anything more than what they are.

I sold my house and got ~$62K out of the deal. I've never sold a house before this and I don't know how taxes work. My mother-in-law told me that if I don't re-invest it in another house within some set amount of time, I'll owe like 50% in capital gains taxes. I know jack poo poo about this, so learn me please.

# ? Oct 7, 2019 20:38

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# ? May 3, 2024 02:39

Hoodwinker: Nov 7, 2005

Quick google says "lolwat?"

quote:

It depends on how long you owned and lived in the home before the sale and how much profit you made.

- If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax-free.
- If you are married and file a joint return, the tax-free amount doubles to $500,000.

To expand, there are a couple of things wrong with this idea. First, you shouldn't generally consider a primary residence as an "investment" and the IRS agrees for the purposes of taxation. There's that massive bit of padding I quoted up there to prevent you from having to pay taxes on the sale of a primary residence. Second, the system doesn't punish you for not buying another house when you sell. Imagine all the poor fuckers who want to downsize to a smaller house (they now owe a bunch of capital gains taxes under this idea that the money isn't "reinvested" into the next, probably cheaper house), or people who move from ownership to renting. Your MIL is speaking complete loving nonsense.

Hoodwinker fucked around with this message at 21:06 on Oct 7, 2019

# ? Oct 7, 2019 21:00

moana: Jun 18, 2005; one of the more intellectual satire communities on the web

Agreed, MIL sounds like the kind of person who thinks you need to carry a balance to improve your credit score and cheers at a large tax refund.

# ? Oct 7, 2019 21:10

LargeHadron: May 19, 2009; They say, "you mean it's just sounds?" thinking that for something to just be a sound is to be useless, whereas I love sounds just as they are, and I have no need for them to be anything more than what they are.

I love her and she is a wonderful lady. I'm glad to hear that her information was bad...yikes!

# ? Oct 7, 2019 21:15

Droo: Jun 25, 2003

Hoodwinker posted:

Your MIL is speaking complete loving nonsense.

It sounds like she is just thinking about a real estate investment 1031 exchange, and didn't know about the capital gains tax exemption for profits on a primary residence.

Edit: and the 50% rate is obviously some Fox news bullshit too, but pretty much no one understands taxes anyway.

quote:

The term 1031 Exchange is defined under section 1031 of the IRS Code. (1) To put it simply, this strategy allows an investor to �defer� paying capital gains taxes on an investment property when it is sold, as long another �like-kind property� is purchased with the profit gained by the sale of the first property.

The delayed like-kind exchange, which is by far the most common type of exchange chosen by investors today, occurs when the exchangor relinquishes the original property before he acquires replacement property.

In other words, the property the Exchangor owns (which is called the �relinquished� property) is transferred first and the property the Exchangor wishes to exchange it for (the �replacement� property) is acquired second.

The Exchangor is responsible for marketing his property, securing a buyer, and executing a sale and purchase agreement before the delayed exchange can be initiated. Once this has occurred, the Exchangor must hire a third-party Exchange Intermediary to initiate the sale of the relinquished property and hold the proceeds from the sale in a binding trust for up to 180 days while the seller acquires a like-kind property.

Using this strategy, an investor has a maximum of 45 days to identify the replacement property and 180 days to complete the sale of their property. In addition to the numerous tax benefits, this extended timeframe is one of the reasons that the delayed exchange is so popular.

Droo fucked around with this message at 21:40 on Oct 7, 2019

# ? Oct 7, 2019 21:38

moana: Jun 18, 2005; one of the more intellectual satire communities on the web

We have a client who just sold their house and somehow forgot that they had 1031'd it a long time ago. Surprise, your basis is a few hundred thousand dollars lower and you're paying taxes on it all right the gently caress now! Whoopsie!

# ? Oct 7, 2019 22:27

LloydDobler: Oct 15, 2005; You shared it with a dick.

She's just operating on old info. I'm pretty sure you used to have 2 years to re-invest capital gains on your residence or it got taxed. That or you had to choose whether to pay tax on it or roll it over into your new house. I think it was sometime in the 90's it was eliminated, or that's when they added the "no taxes on up to $250,000 ($500,000 per couple)" rule.

# ? Aug 12, 2020 22:50

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# ? May 3, 2024 02:39

WithoutTheFezOn: Aug 28, 2005; Oh no

1997.

# ? Aug 12, 2020 23:03

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Sold house, now what?