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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4093
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I purchased property on August 1, 2014. I used my own

Customer Question

Hello, I purchased property on August 1, 2014. I used my own construction loan to build a new house on the property as my primary residence. How do I avoid capital gains taxes?
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

If you build your own primary residence, and live in for two years or more as your primary residence, any profits on sale would be capital gains tax free (up to certain dollar limits).

Expert:  PDtax replied 1 year ago.

Let's say you ponied up $50,000 of your own money, and borrowed $200,000 more to buy and build. You lived there for three years, and sold for $400,000, paying off the loan balance and pocketing the remaining cash. The cash would be yours tax free.

Expert:  PDtax replied 1 year ago.

Thanks for asking at Just Answer. Positive feedback is appreciated. I'm PDtax.

Customer: replied 1 year ago.
What can you use to prove when you started living there?
Expert:  PDtax replied 1 year ago.

A certificate of occupancy works very well (the town approves your home for living). Receipts from your moving company, change of address for your mail, driver's license change, all support the move-in date.

Expert:  PDtax replied 1 year ago.

Issuance of homeowners insurance is more open ended. It might be issues early, supporting a longer residence period than other documents might...

Customer: replied 1 year ago.
Ok and what about a utility bill?
Customer: replied 1 year ago.
What about a utility bill? Cert of occupancy is not ideal, they would not grant it to me in time because of a larger subdivision
Customer: replied 1 year ago.
Customer: replied 1 year ago.
That's my last question, are you able to answer that?
Customer: replied 1 year ago.
PD Tax, can I use a utility bill? Thanks.
Expert:  PDtax replied 1 year ago.

A utility bill works too. That's even more open ended, since you would have electric service likely well before you move in. A few months bills might do it, since your electric use would go up once you moved in.