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RV-Dreams.com Home -> RV-Dreams Community Forum -> Buying An RV -> Capital Gains Tax
Post Info TOPIC: Capital Gains Tax
RonandBee


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Capital Gains Tax
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Okay, so I'm researching the Capital Gains Tax, and I'm a little confused, so I figured I'd ask you experts out there about it. We are looking at selling our house, which we paid cash for, and buying our RV to go full-timing after the house sells with the monies from the sale of the house. We have been in the house less than two years. It will be two years this July 2015. We paid $280K for the house and think we can get $280k to $300K for it. We are looking at RV's in that same price range, or a little less. Since we are rolling the money right into the RV, which will be our primary residence, does the 2 year stipulation affect us? Is the Capital Gains Tax even a concern since we file jointly, am retired, and wouldn't make a very, if any profit, from the sale of the house? Any and all information everyone could provide would be greatly appreciated! My head is beginning to hurt!  Hahaha    no

 

Thanks in advance!

 

Ron and Bee



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heyjohnm


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You can only claim the exclusion for sales of your personal residence once every two years.  You must have lived in the house and used the house as your personal residence in two of the past 5 years.  In your case, if you sold another personal residence just prior to purchasing your current residence and claimed a sales tax exclusion, you are not eligible for another exclusion on your current personal residence until two years from that prior sale.  If that is not the case and you do not have the concern of a prior sales exclusion within two years, you would be eligible for an exclusion.  If you sell before having lived / used the residence for two years it is my understanding that the sales exclusion eligibility is reduced.  



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RonandBee


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John, Thanks for the info. Prior to this house we were renting for a coupe of years. We sold a house we had within the past year for peanuts and there was no gain on that sale. We have never claimed a sales tax exclusion. So am I right in my understanding that if we sell our house for, say, $280K and buy our RV for $280K then we shouldn't have a problem, correct? The two year requirement to claim the capital gain exclusion doesn't pertain since we really wouldn't have a gain since we're rolling it right into our new primary residence, which is the RV.

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Jake62


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Ron,

The exclusion clause is only relevant if you have a capital gain you want to "exclude" from your taxes. If you purchased your residence at $280k and sold your residence at $280k you have no gain and, therefore, you have nothing to report on your 1040.

www.irs.gov/taxtopics/tc701.html

Hope this helps,
Tim


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Tim & Cindy
RonandBee


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Tim & Cindy, yes, that helps a great deal! So if we bought the house for $280K, sold for $300K, that would be $20K gain, but we could use our exclusion on that $20K, correct? Buying the RV for our primary residence is irrelevant.

Ron

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Jake62


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Actually,

I hate to say this, but maybe. You actually don't meet the "Ownership and Use Test"  (according to your situation as described ... at least until July 2015) in IRS publication 523...

http://www.irs.gov/publications/p523/ar02.html#en_US_2013_publink1000200713

Ownership and Use Tests

"To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

1.  Owned the home for at least 2 years (the ownership test), and

2.  Lived in the home as your main home for at least 2 years (the use test)."

However, if you read this, there is an exception

"Exception.   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. However, the maximum amount you may be able to exclude will be reduced. See Reduced Maximum Exclusion , later

If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. This applies to those who:

  • Fail to meet the ownership and use tests, or

  • Have used the exclusion within 2 years of selling their current home.

 

In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons.

  • A change in place of employment.

  • Health.

  • Unforeseen circumstances."

Hope this helps,

Tim



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Tim & Cindy
RonandBee


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Thanks Tim & Cindy...Yes, that does help. I appreciate everyone's help!

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