Retirement, Relocation, Taxes

[TCengineer44]

We will be retiring at 65 years old and moving from NY to South Carolina in January 2025.

Will we have to pay additional taxes for the sale of our Primary Residence in NY?  Is there any advantage to close on the sale of the house in NY in 2024 or 2025

Thanks

[LoriC17 · Accepted solution]

Congratulations on your retirement.

The sale of your home may cause an additional tax liability.  There is an exclusion if you meet the following tests.

1) Have you lived in the home as a primary residence at least 2 of the past 5 years before the sale?

2)Have you owned your home for at least 2 years out of last 5 years leading up to sale?

If yes to both of these questions then you qualify for exclusion of some of the profit. For Married Filing Joint the exclusion amount is $500,000.00. Single/Married Filing Separately the amount is $250,000.00. 

This means that you can sell your home for a profit up to that threshold and have no tax liability. In order to find the profit you would take your purchase price + any capital improvements - Selling price - selling costs.

I am including a link that the IRS has on home sales for additional information.

https://www.irs.gov/publications/p523

[LoriC17 · Accepted solution]

Also,

If the sale happens after you move NY will still want you to include the income if any since the house is located in NY. SC does not require you to pay taxes on property sold in another state.

[KochuK]

Congrats on retirement planning.

Since the primary home is located in New York, you would need to report home sale gain (with possible section 121 gain exclusion) to:

NY resident tax return, if to be sold in 2024 (taxed as a NY resident) or;

NY nonresident tax return (taxed by prorating tax calculated as if a full year resident), if to be sold in 2025 while you are a South Carolina resident.

NY conforms with Federal treatment of home sale gain exclusion, i.e. If the house was the seller's primary residence for at least two years within the last five years, they qualify for a capital gains exclusion of $250,000 for an individual and $500,000 for a married couple.

If you are eligible for the home sale gain exclusion, and your gain is more than $500K, the excess is subject to both Federal and NY taxes.

Hope the above helps. Thanks for posting the question.