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I am retired, on a pension of 52992 per year, soc sec

I am retired, on...

I am retired, on a pension of 52992 per year, soc sec disability at 31644 per year, total of 84636 per year. I withdrew 20000 from ira since I am now over 59 1/2. so total for 2018 taxable income will be 104,636.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

Question is: I am selling my home for 515,000 which I have lived in for 7 years and bought it for 345000 . I am buying brand new home for 519,000. Borrowing 175000 and paying off a heloc for 87000. Will I have a cap gains issue?

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Customer reply replied 24 days ago
Cash from sale of my home: $352,632 / loan from bank: $175,000 / Price of Home I am buying: $519,000 / add ons include escrow fees, etc. Question is: I am also paying off a Heloc loan in the amt of $87,000, what will be my total taxable income amount for 2018? And will there be any capital gains tax or any other taxes involved with my real estate transactions?
Customer reply replied 24 days ago
more pertinent info. I initially used $80,000 from my IRA to purchase the home I am selling now, then after the close of escrow, quickly got the heloc for $80,000 and rolled that heloc loan amount of $80,000 back into my IRA before triggering an early withdrawal penalty.
Answered in 43 minutes by:
3/27/2018
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,772
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Based on the information you provided regarding the sale of your home, you will have a gain of $170,000 from the sale ($515,000 minus $345,000). Buying a new home has no impact on the calculation for capital gain on your old home.

BUT

If you have owned and lived in your home for 2 of the 5 years immediately preceding the sale, you would qualify for up to $250,000 (if you file single)/$500,000 (if you file married filing jointly) on any gain.

Because your gain will be $170,000, all of it will be excluded and there will be no capital gains tax due.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 24 days ago
Thank you, Barb. Hope you are having a nice evening. Also, since I am borrowing $175,000, and putting $352,000 cash to the new house, I will have about $41,000 left over to use for home improvements such as working the yard and putting in landscaping, etc. Will the $41,000 be treated as income since I am not going to use it towards the initial purchase of the home transaction?
Customer reply replied 24 days ago
no thank you, ***** ***** prefer to save $ and continue via chat.

No. The $41,000 is NOT considered income.

Any telephone offers are site generated. Please ignore it.

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Customer reply replied 24 days ago
Since I am selling the home, any improvements I have invested in the home since 2012 can be deducted this year, correct?

Any improvements get added to your basis--what you paid when you purchased.

For example, if you purchased for $345,000 and added a new roof for $10,000, your basis would be $355,000 for the capital gains calculation.

Because you qualify for the sale of home capital gain exclusion, you will not report the sale of your home on your 2018 tax return to be filed early in 2019.

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Customer reply replied 24 days ago
I'm sorry, can you simplify the explanation of the last paragraph please.

Improvements do not get deducted on your tax return when you sell your home.

The total paid for improvements gets added to what you paid when you purchased the home.

For example, if you purchased for $345,000 and added a new roof for $10,000, your basis would be $355,000.

When you sell your main home, the IRS allows a sale of home exclusion (as I explained earlier) where you can excluded up to $250,000 (filing single)/$500,000 (filing married filing jointly).

Your entire gain is excluded whether or not you add the improvements to your basis.

Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,772
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Customer reply replied 24 days ago
ok, thank you very much! Have a great day, or night Barb!

My pleasure.

Thank YOU for the positive rating of my answer. It is very much appreciated.

Please do not hesitate to let me know if you have any other questions.

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I just received notification of your VERY GENEROUS BONUS. Thank you very much!

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Customer reply replied 24 days ago
you're welcome. take care!

You do the same!

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