What are the capital gains exemptions for house sales?
February 9, 2005
Date: Tue, 25 Jan 2005
My aunt bought a house in December, 1999. She has let my wife and me live there from that time to the present without charging us rent. If she wants to sell the house and buy another one, will she be charged tax on capital gains? What is the rate?
Date: Mon, 31 Jan 2005
Since your aunt never charged you rent, it's questionable whether she can make a tax-deferred exchange for the residence. Since she never lived there, it won't qualify for the exclusion for the sale of a principal residence.
The maximum federal income tax rate that applies to long-term capital gains is 15%. State taxes can also apply. In California, net long-term capital gains are taxed at the same rate as other income. If she lives in a different state from the one where the residence is located, she may be required to file income tax returns in both states. Your aunt should consult a tax advisor about her situation.
We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.
Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Connect on Google+