Tax Gains ?

bigdog · 03-20-2018, 02:04 PM

I know that most folks on this Forum are not CPA's, but this is a general question about selling a property, that I'm sure a number of folks know about......

I recently sold my property at the Lake, but will be buying another soon.
Property sold was considered a second home, and which was never rented.

Questions.....

When I file my 2018 taxes next year, would that property fall under 'Capital Gains' for the IRS ?

What about the state of NH taxes subject to pay, if any ?

Thanks !

joey2665 · 03-20-2018, 02:15 PM

Quote:

Originally Posted by bigdog

I know that most folks on this Forum are not CPA's, but this is a general question about selling a property, that I'm sure a number of folks know about......

I recently sold my property at the Lake, but will be buying another soon.
Property sold was considered a second home, and which was never rented.

Questions.....

When I file my 2018 taxes next year, would that property fall under 'Capital Gains' for the IRS ?

What about the state of NH taxes subject to pay, if any ?

Thanks !

I am a CPA but I will make this short and sweet.

If the property was sold and there was a gain.

In other words selling price (less selling expenses, commissions legal fees ect) is more than the cost plus any expenses to improve the property not already deducted on your previous returns then there is a capital gain. If you depreciated the property on your previous returns then the cost is reduced by the depreciation.

So if indeed there was a gain, in 2018 the max federal capital gain rate is 20%. Depending on your resident state there could be capital gain tax there also, but the State of NH only has an interest and dividend tax there is no capital gain tax.

Winni_Bay · 03-20-2018, 02:19 PM

Hello
We flipped a few properties on the lake within the last 10 years what we did to avoid paying capital gains was to do a 1031 exchange it rolls over the capital gain into the next property as long as that property was worth more than the one you sold and is considered a like-kind property
We recently sold the place in Laconia and I didn't have enough time to do a like-kind Exchange 1031 so I had to pay the capital gain and recently just purchased a waterfront in moultonborough I could not find a place in time to do the 1031 exchange you have to enroll that money into an account when you sell and then use it to purchase within a certain amount of time
So you will have to pay Capital Gains on what you sold if it was not your primary residence I'm not a CPA but that's what happened with us over the course of three properties in 10 years
Good luck in your search for a new property
Dave

Shreddy · 03-20-2018, 02:38 PM

Quote:

Originally Posted by Winni_Bay

Hello
We flipped a few properties on the lake within the last 10 years what we did to avoid paying capital gains was to do a 1031 exchange it rolls over the capital gain into the next property as long as that property was worth more than the one you sold and is considered a like-kind property
We recently sold the place in Laconia and I didn't have enough time to do a like-kind Exchange 1031 so I had to pay the capital gain and recently just purchased a waterfront in moultonborough I could not find a place in time to do the 1031 exchange you have to enroll that money into an account when you sell and then use it to purchase within a certain amount of time
So you will have to pay Capital Gains on what you sold if it was not your primary residence I'm not a CPA but that's what happened with us over the course of three properties in 10 years
Good luck in your search for a new property
Dave

For a 1031 like-kind exchange to apply the property exchanged generally needs to be "trade or business" property (e.g., a rental property). Thus, given the fact that it was a second home and not rented, likely not able to qualify unfortunately.

joey2665 · 03-20-2018, 02:52 PM

Quote:

Originally Posted by Shreddy

For a 1031 like-kind exchange to apply the property exchanged generally needs to be "trade or business" property (e.g., a rental property). Thus, given the fact that it was a second home and not rented, likely not able to qualify unfortunately.

You are correct, it is not eligible for a 1031 exchange.

Biggd · 03-20-2018, 03:44 PM

What of you're in the business of fixing up and flipping houses, is that not a business?

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Shreddy · 03-20-2018, 03:50 PM

Quote:

Originally Posted by Biggd

What of you're in the business of fixing up and flipping houses, is that not a business?

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Generally, yes. The code specifically references trade or business or for investment. The IRS on the other hand has specifically stated that property for personal use, whether it be a primary residence or a vacation home will generally not qualify

joey2665 · 03-20-2018, 04:47 PM

Quote:

Originally Posted by Biggd

What of you're in the business of fixing up and flipping houses, is that not a business?

Sent from my SM-G950U using Winnipesaukee Forum mobile app

It then depends on the holding period. If it is owned more than one year it is a long term capital gain with a max of 20% tax rate. If it owned less than one year it is taxed are your ordinary income rate which could be as high as 37% in 2018

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Sue Doe-Nym · 03-20-2018, 07:05 PM

Interesting topic. I have wondered about the $500k capital gains exclusion for the sale of a primary residence. Now that Trump has simplified the tax code, will that still be in effect. I hope so! We have a waterfront property for which we paid under $300k some years ago, and we would hope it would bring at least $800k. Does anyone know? Thanks in advance🤓

joey2665 · 03-20-2018, 09:31 PM

Quote:

Originally Posted by Sue Doe-Nym

Interesting topic. I have wondered about the $500k capital gains exclusion for the sale of a primary residence. Now that Trump has simplified the tax code, will that still be in effect. I hope so! We have a waterfront property for which we paid under $300k some years ago, and we would hope it would bring at least $800k. Does anyone know? Thanks in advance

The rule is 250,000 for single and 500,000 married and it must be your primary residence for at least 2 of the 5 years prior to the sale.

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Sue Doe-Nym · 03-20-2018, 09:59 PM

Thank you! Helpful information. I kept hoping that it would be discussed when tax reform was under consideration.....
nobody mentioned it.

joey2665 · 03-21-2018, 04:33 AM

Quote:

Originally Posted by Sue Doe-Nym

Thank you! Helpful information. I kept hoping that it would be discussed when tax reform was under consideration.....

nobody mentioned it.

No problem. If you have a more specific question just send me a PM. Always happy to help a member.

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03-20-2018, 02:04 PM	#1
bigdog Senior Member Join Date: Apr 2006 Location: Central MA-Gilford Posts: 1,446 Thanks: 340 Thanked 119 Times in 96 Posts	Tax Gains ? I know that most folks on this Forum are not CPA's, but this is a general question about selling a property, that I'm sure a number of folks know about...... I recently sold my property at the Lake, but will be buying another soon. Property sold was considered a second home, and which was never rented. Questions..... When I file my 2018 taxes next year, would that property fall under 'Capital Gains' for the IRS ? What about the state of NH taxes subject to pay, if any ? Thanks !

03-20-2018, 02:19 PM	#3
Winni_Bay Senior Member Join Date: Jun 2008 Posts: 50 Thanks: 1 Thanked 2 Times in 2 Posts	Tax Hello We flipped a few properties on the lake within the last 10 years what we did to avoid paying capital gains was to do a 1031 exchange it rolls over the capital gain into the next property as long as that property was worth more than the one you sold and is considered a like-kind property We recently sold the place in Laconia and I didn't have enough time to do a like-kind Exchange 1031 so I had to pay the capital gain and recently just purchased a waterfront in moultonborough I could not find a place in time to do the 1031 exchange you have to enroll that money into an account when you sell and then use it to purchase within a certain amount of time So you will have to pay Capital Gains on what you sold if it was not your primary residence I'm not a CPA but that's what happened with us over the course of three properties in 10 years Good luck in your search for a new property Dave

03-20-2018, 03:44 PM	#6
Biggd Senior Member Join Date: Nov 2016 Location: Waltham Ma./Meredith NH Posts: 4,086 Thanks: 2,201 Thanked 1,187 Times in 754 Posts	What of you're in the business of fixing up and flipping houses, is that not a business? Sent from my SM-G950U using Winnipesaukee Forum mobile app

03-20-2018, 07:05 PM	#9
Sue Doe-Nym Senior Member Join Date: Jul 2009 Posts: 1,425 Thanks: 743 Thanked 788 Times in 413 Posts	Interesting topic. I have wondered about the $500k capital gains exclusion for the sale of a primary residence. Now that Trump has simplified the tax code, will that still be in effect. I hope so! We have a waterfront property for which we paid under $300k some years ago, and we would hope it would bring at least $800k. Does anyone know? Thanks in advance🤓

03-20-2018, 09:59 PM	#11
Sue Doe-Nym Senior Member Join Date: Jul 2009 Posts: 1,425 Thanks: 743 Thanked 788 Times in 413 Posts	Thank you! Helpful information. I kept hoping that it would be discussed when tax reform was under consideration..... nobody mentioned it.