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If a house is sold and the sale is under $500,000 and is $

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if a house is sold...
if a house is sold and the sale is under $500,000 and is $ 420,000. If the amount is taken out of a money market each month is their ever a tax on this money.
Submitted: 2 years ago.Category: Tax
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9/11/2015
Tax Professional: emc011075, Tax adviser replied 2 years ago
emc011075
emc011075, Tax adviser
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Hi. My name is ***** ***** I will be happy to help you.

What are you taking money out of money market for? Mortgage payments?

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Tax Professional: emc011075, Tax adviser replied 2 years ago

If you have used the house as your personal residence for at least 2 out of 5 years and you file married filing jointly, you may qualify for the 500K capital gains exclusion, which means if the house is sold for less than 500K, there are no capital gains to pay.

However, if you use the proceeds from sale and invest in a money market account that generate interest or dividends, the interest and dividends will be taxable.

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Customer reply replied 2 years ago
The money would be used for living expenses. Where can this money be put that would not cause a taxable invent.
Tax Professional: emc011075, Tax adviser replied 2 years ago

You would have to keep it in an account that will not generate interest, like regular checking account. If you put it into money market at 5% interest, you are using the money to generate investment, so the 5% will be considered investment income.

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Tax Professional: emc011075, Tax adviser replied 2 years ago

If you qualify for the exclusion the proceeds from the sale of the home will not be taxed. However, if you use the money to generate more income, like investing it in money market or stock market buying bonds, mutual funds or stocks, you are generating investment income. And only the ADDITIONAL income is taxed.

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Tax Professional: emc011075, Tax adviser replied 2 years ago

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

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