NASTY HABIT

sold my rental property this year....gonna take the hit... oh well...easy come easy go ...

mcollinstn

Cgarrett

certainly not.
As with all investments, the sale price is compared to the purchase and improvement price (maintenance costs not allowed, but improvements are). If you "got" more in it than you sold it for, then you can claim a "capital LOSS".

You can offset up to $3000 of regular income with capital losses each year PLUS you can offset both long and short term capital GAINS (from profitable stock sales, etc) with the amount of the LOSS.

any capital Losses will roll over to the next year where you can continue to use them up to offset income or gains.

Be sure to let your tax man know about your loss and be able to document it.

Intolerant1

What about taking out a second mortgage for the value of the property and putting that cash in your pocket before you sell? I had heard of people doing this but it seems they have to get you somehow.

thunderdan

Chris,

The issue is that you are still responsible for paying the taxes on your net gain, your increase in value over your cost basis(what you paid for it and any improvements, regardless of what and how much of a mortgage you hold.

This is going to force me to look into swaping dollars under the 1031. I pay enough in stinkin taxes, NO MORE...

Thanks for the feedback...

MitchStellin

I just completed a Land Exchange. It is very easy and is the only way to avoid Capital Gains. You can be upside down on a property and still pay the CG. TD is correct, it is the cost basis less what it sold for X 28%!!!!! The Land Exchange may cost a few hundred dollars for the paperwork but is is worth it. Mine was $500. saved me 20k.

BattleCry

There is all kinds of ways that it can be done.

thunderdan

Battle Cry,

What other ways? I am all ears.

Phknlwyr

Thunder,

A 1031 exchange - "Starker Trade or a like-kind exchange" - requires that you escrow the proceeds of sale with a "qualified intermediary" at closing. You then have 75 days to identify the property that you wish to roll the proceeds into. You have to roll all of the proceeds into the new property to avoid a tax consequence. Once the property is identified, you have to go to closing within (I believe) sixty days at which point the qualified intermediary releases the funds to the escrow company at settlement.

Otherwise, if you have lived in the home as your main residence for at least two straight years prior to the sale, you have a shield of up to $250,000.00 on the gain, taxfree. If it was not your main residence, Mr IRS will be getting a nice check from you in the near future.

thunderdan

Phknlwyr,

That is what I thought, so if I sold my property for 100 dollars, I must buy another property for 100 or greater, regardless of whatthe gain is, correct??

Thanks for your help..

toonatime

This topic started as investor property,,but then the property was stated to be 2nd home..IRS.gov has much info..for both