I never lived in the house and am splitting the profits from the sale with my in-laws, who went in halfway with me and my husband. The house is a new construction house built specifically to sell with a construction loan. Are you required to pay taxes on the proceeds of the sale of a house? It should be around $150,000 split in half.
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Are you required to pay taxes on the proceeds of the sale of a house?
Since you never lived in the property as your primary residence, yes you have to pay taxes on the gain.
What if I use some of the profits to build another house? The funds could be used on buying land, costs for construction, etc.
What you use the profit/gain for doesn't matter. The gain is still reportable and taxable. It "could" be offset by any qualified expenses claimed, assuming you are "in the business" of building/selling properties. But it doedsn't change the fact that there's no "special treatment" for your gain.
@CaitlinB1 wrote:What if I use some of the profits to build another house?
Is this other house for the same purpose, to build and sell?
If so, this is a Schedule C business. That means it is subject to both income tax AND self employment tax (Social Security and Medicare taxes).
Yes. We will be building another house to sell it but it is not under a company or business. Just me and my husband own the land and are listed as individuals on the offer and deed.
Just because you don't have it registered as a business does not mean it is not a business.
You are regularly doing an activity on an ongoing basis with the intention of a profit. That is a business, which is subject to both income tax and self employment tax.
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