Dallas, TX · Member since 2013 · 67 posts · 0 votes
I'm planning on selling my townhouse and have lived there for 1 1/2 years. After I sell the townhouse, I'll be living with a friend of mine for anywhere from 3 months to a year until I buy my primary again. Will living at a few addresses in a relatively short time affect my loan rate and/or terms?
Another question: do you have a capital gain on the townhouse? If so, then you can avoid tax if you lived there for 2 years prior to selling, so at least think about this in the context of your plans. If you sell after 1.5 years, you'll have a long term capital gain, taxed at 15% if you're in the 25% or higher income tax bracket. If you're only in the 15% tax bracket, then there will be no tax on the gain and thus taxes will not be a consideration.
For a single person, the 25% tax bracket starts with taxable income of $36,250 (include the gain from the townhome in that number). Taxable income is after your personal exemption and itemized deductions have been applied, so it equates to gross income of at least $46,250, and likely more if you itemize your deductions (which you probably would if you have a mortgage on the townhome).
Another question: do you have a capital gain on the townhouse? If so, then you can avoid tax if you lived there for 2 years prior to selling, so at least think about this in the context of your plans. If you sell after 1.5 years, you'll have a long term capital gain, taxed at 15% if you're in the 25% or higher income tax bracket. If you're only in the 15% tax bracket, then there will be no tax on the gain and thus taxes will not be a consideration.
For a single person, the 25% tax bracket starts with taxable income of $36,250 (include the gain from the townhome in that number). Taxable income is after your personal exemption and itemized deductions have been applied, so it equates to gross income of at least $46,250, and likely more if you itemize your deductions (which you probably would if you have a mortgage on the townhome).
Yup David is right about living in the townhouse before you sell it to take advantage of the Capital Gains owner occupied sales. You should definitely take advantage of that.
SO maybe live in there for the extra 6 months before selling? This all depends on how much capital gains or you get when you sell
Thanks for the replies and info! I've calculated that if I sell my townhouse and take the capital gains tax hit, I'd come out about the same as if I'd wait to sell after the two-year mark. Reason being that I'll be saving quite a bit by not having a mortgage, HOA, utilities, etc. and just renting out a room from my friend until I purchase a new primary.