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Do I pay tax on selling my fha home

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Dee Xixi

Real Estate Investor from waltham, Massachusetts

May 02 '10, 12:16 PM


I just sell my fha property which i own for 1 yr and six month, just wonder how much tax to pay or do i have too. I want to use the profit as down deposit on two rehab property.


Edited Jun 26 2010, 12:41


Account Closed

May 02 '10, 12:25 PM
1 vote


You're not entitled to a capital gains exemption because you haven't lived in the house long enough. You'll pay taxes on the gain which is the difference between what you sold the house for less any closing costs and basis you have in the house. The basis is what ever you originally paid for the house plus any capital improvements made to the property.

If you rented any part of the property or claimed a home office deduction you will be subject to some depreciation recapture as well.

Chances are after 1 and a half years you have very little tax to pay.


Edited Jun 26 2010, 12:41


Dee Xixi

Real Estate Investor from waltham, Massachusetts

May 02 '10, 12:32 PM


Thanks Charles.
I am a little bit confused on the answer tho


Edited Jun 26 2010, 12:41


Account Closed

May 02 '10, 02:39 PM


When you close the property you won't have to worry about any federal or state income tax. An adjustment will be made for property taxes though.

At the end of your tax year, you will have to report the sale of the home and income tax will be due on any capital gains.

If there is something specific that you don't understand please ask.


Edited Jun 26 2010, 12:41


Dee Xixi

Real Estate Investor from waltham, Massachusetts

May 03 '10, 02:31 AM


Hi Charles, here is the full story. I purchased the home via fha in November 2008. It was a duplex. This year i pay tax on my IRS for rented it out. I sold it in April, after realtor fee, and other expenses + the goverment credit I should have $21,600 left for me. So i just wonder how much taxes to pay or should i even pay because I am going to use the money as down deposit toward another home.
Thanks for your input.


Edited Jun 26 2010, 12:41


Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

May 03 '10, 03:49 AM


The fact you're using the sales proceeds for a down payment on another property doesn't affect the taxes unless you're doing a 1031 exchange. Since you lived in the one you're selling I don't think this applies.

What you wrote is still not the whole story. How much did you pay for this house? How much were the closing costs? How much depreciation did you take or should you have taken?

Here's how you compute the tax:

Basis = what you paid plus closing costs less depreciation.
Deprecation is the amount actually taken or the amount you could have taken, whichever is larger.
Net sales proceeds = amount you sold it for less selling costs.
Note that the net sales proceeds is not related to any checks you may receive when you sell.
Gain = net sales proceeds - basis
Amount subject to depreciation recapture tax = lesser of gain or depreciation
Amount subject to capital gains tax = gain - (amount subject to deprecation recapture tax)

You'll pay the taxes when you file your 2010 taxes, assuming the sale is this year.


Edited Jun 26 2010, 12:42


Jon Holdman, Flying Phoenix LLC


Account Closed

May 04 '10, 01:05 PM


So you have both personal and rental use of the duplex in 2009. Owning this duplex will give you some itemized deductions and some rental income (loss). You want to make sure to claim the depreciation expense because regardless of whether you did or not it will be recaptured when you report the sale on your 2010 tax return.

Jon has described the sales transaction very well. More than happy to go through it if you supply the details. You would need the HUD-1 from your initial purchase of the property as well as when you sold the property. Hopefully you have kept track of any major improvements during the year as well.


Edited Jun 26 2010, 12:43


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