All Forum Posts by: Nicole Parnell

No one can give you % that you will pay. We can tell you that it might be a capital gain taxed at 0, 15 or 20%. 

Or You might not even pay any taxes based on section 121 partial exclusion. 

Few sentences are never enough to provide you any answers.

Need to know your what is your flipping activity consists of. Why did you sell this house? And other detail.

Thanks for your reply. Actually I purchased home for $86k about 7 months. Remodeled for $45k. Real estate agent believes he could put it on market for $172k based on comps. I want to sell it and use profit to pay debt off and buy another flip. I'm currently living in home.  

@Nicole Parnell

@Jan Kerr has given you some great advice. I agree with everything she said. And I'd like to add that since it sounds like you really want to move on, take what she said to your accountant and see if they can help you to deduct any improvements and get clear on the timeline so you can move this property as soon as possible at the lower tax rate.

Your wish is to sell soon and move out so you can free up your equity, correct?

@Nicole Parnell Hi Nicole, I see your dilema. We have all had to deal with that question of holding a property longer to be able to take the long term capital gain at 15%  vs the short term capital gain at 23%. But I think there is some confusion in your question.  

There is an IRS Rule that allows you to take the primary residential deduction of up to $250,000 if you are single and up to $500,000 if you are married on any gain earned from appreciation of your primary residence. The requirement is that you must have lived in the house for 2 years out of the last 5 years. 

For an investor who does not live in the house, that is not even an option, but holding a property 1 year and 1 day qualifies for long term capital gains. If you stay exactly one year or less, then you are into the short term capital gain. However, you can reduce the gain on the taxable amount by offsetting the gain by documenting and proof of any capital improvements you put into the proeprty. The capital improvements will be decusted from the gain amount and you will only be taxed on the difference. 

Capital improvements are major improvements that increas a homes' value, not just repairs or minor upgrades. 

To answer your question, If you have stayed over one year, you are already into long term gain. if it is less than one year, how much will you pay in taxes on the gain at 23% and how much will you pay in taxes on the gain at 15%. What is the difference. Can you deduct any capital improvements? Once you know those numbers, you can decide it it is worth it to pay the higher taxes to take your cash now, or if it is worth it for you to forget the cash out for now and stay another year to take the full deduction and not pay any taxes on the gain. 

FYI -I am not an accountant, but this is my understanding based on my own accountant's advice. Please verify with your own accountant before taking any action so you know for sure. I hope this has helped. Good luck to you!