We have owned a house for 9 months in Florida and want to sell it - we should make a profit of $100K on this house - what capital gains tax would we pay if we are in the 35% tax bracket? This is our primary residence and we will be buying another home to replace this one in FLorida. Would we better to wait to sell after we have been in it a full year? What capital gains tax would we pay after a year? Thanks!
Assuming that you do not qualify for any of the special exceptions, you would pay 35% if you well it after one year or less OR 15% if held more than one year.
If you owned and lived in it for at least 2 years, the first $250,000 (or $500,000 if married filing jointly) is completely tax exempt.
There are some exceptions that could get you a partial exemption even if you lived there less than two years. The primary ones are a sale due to change in employment location, a sale due to a health related move, and a sale due to a decline in financial ability to maintain the home.
Reply to Jon Andrews's Post: So - we should wait until after one year? Will we pay anymore than the 15%? Please specify - thanks!
If you own the house for more than one year, i.e. one year and one day, it will qualify for long term capital gains and your maximum tax will be 15% of the net gain.
Reply to Jon Andrews's Post: Does the tax amount depend on which State that you live in? How about Florida?
Florida does not have an income tax so there is no additional tax for you. If you lived in, or if the property was located in, a state that has an income tax, you would need to consider that as well.
I deal with all levels of tax planning and controversy - from the ordinary to the complex.