Hello all,
I had originally purchased a home to live in. But suddenly due to work, I needed to move away. As such, due to the fact that I was leaving so quickly I didn't want to sell the house right away because I would have lost a lot.
It's now been a few years and I now plan on selling that home and using the profit from that home to buy a personal home where I would live full time in. I know that if I had sold a personal home I could use the profits from that home sell towards buying a new personal home without paying taxes. But didn't know if I could do the same thing for my situation.
Does anyone know?
No. This is not how this works. Back in the 1990s, you could defer a gain on the sale of your home by purchasing a more expensive home. That law was replaced by the 2 out of 5 year exclusion. You would have had to live in the house as your primary home for at least 2 out of five years before the date of sale to be able to exclude any gain. The entire gain will be taxable to you.
No. This is not how this works. Back in the 1990s, you could defer a gain on the sale of your home by purchasing a more expensive home. That law was replaced by the 2 out of 5 year exclusion. You would have had to live in the house as your primary home for at least 2 out of five years before the date of sale to be able to exclude any gain. The entire gain will be taxable to you.
I agree with @ColeenD3, however, because the property you sold was an investment property you could avoid capital gains using the 1031 exchange. But... you could not purchase another personal residence, you would have to purchase another investment property.
Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.
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