Recasting Mortgage & Capital Gains Tax

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Recasting Mortgage & Capital Gains Tax

Hannah Porro
Member since 2024 · 1 post · 0 votes

I am looking to purchase a new home and sell my old home, which I have about 300k equity in. I will be recasting my old mortgage to the new property. However, when I recast the mortgage, I only want to put 200k back in and keep 100k for renovations. Am I subject to any tax or capital gains tax on that 100k? Just curious!

Thank you!

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    2y
    Quote from @Hannah Porro:

    I am looking to purchase a new home and sell my old home, which I have about 300k equity in. I will be recasting my old mortgage to the new property. However, when I recast the mortgage, I only want to put 200k back in and keep 100k for renovations. Am I subject to any tax or capital gains tax on that 100k? Just curious!

    Thank you!


     If the house you are going to sold was your owner occupied primary residence AND you have occupied at least 2 out of the last 5 years all gains up to 500k a exempt from taxes. and remember equity and gains are not the same thing. For example, If you put down 100k when you bought the house and the house has gone up in value you gain would only be the 200k, not the 200k plus 100k down payment. The 100k is just a return of your capital. 

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Hannah Porro:

    I am looking to purchase a new home and sell my old home, which I have about 300k equity in. I will be recasting my old mortgage to the new property. However, when I recast the mortgage, I only want to put 200k back in and keep 100k for renovations. Am I subject to any tax or capital gains tax on that 100k? Just curious!

    Thank you!

    Recasting is when you make a payment on an existing loan and update the payments - for example if I owed $100,000 and my payment was $600/mo and I paid it down by $40,000 recasting is they update the payment based on the new $60,000 balance.

    If I understand this correctly, you are selling a home which you will make $300,000 on and putting $200,000 down and keeping $100,000 to renovate?

    Trying to understand the situation before being able to advise. But note, what you use money for after selling a home does not matter - what matters is at the point of sale and if it was considered owner occupied or not.
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