Capital Gains on Home Sale

[cryptospore]

I recently sold the only home I have owned that is about 300 miles from where I currently live. I moved out of it 14 years ago and into an apartment near where I currently work. I have never rented it other than once to a friend for a few months. He paid me cash and the utilities have always been in my name. I am going to take the approximately $120,000 proceeds from the sale and use it for down payment on a condo that will be my primary residence. I was wondering if I need to pay capital gains on the proceeds from the sale?

[DoninGA]

Since you have not lived in the home for a minimum of two years in the five year period before the sale, the home is not your primary residence and you cannot exclude any gains from the sale on your tax return.

If you have a gain on the sale, what you do with the proceeds is not relevant.

The requirement to purchase another home after the sale of your primary home for the same or greater price than the prior home sale to defer any capital gains was removed from the tax code in 1997.

Your sale of the home will be as a second home and any gains will be taxed as a long term capital gain.

[cryptospore]

Thanks for the quick answer.  The research I did was saying that but I was hoping it wasn’t the case.  I set 15% of the proceeds aside in case it was true.

[NCperson]

it won't be 15% of the proceeds...it'll be 15% of the proceeds LESS what you originally paid for the home (plus any improvements)

[cryptospore]

So if I purchased it as a new construction in 1996 with a mortgage I would be able to subtract the purchase price or just the amount of the down payment?  Thanks for your help.

[DoninGA]

The mortgage or down payment is not a factor in calculating the gain or loss for the sale.  The Purchase Price is the Total Price you paid for the home not just the down payment.

Gain or Loss equals Sales Price minus Sales Expenses minus Adjusted Basis (Purchase Price plus the cost of improvements prior to the sale)

[cryptospore]

This is great news.  Instead of having to pay around 18k I’ll only have to pay around 7k.  What documentation will I need from the original purchase when I file or have in case of an audit?

[NCperson]

a copy of the closing statement would suffice.  Alternatively, it may have been recorded at your county deed office what the transaction amount was.