topic How to best handle capital gains from sale of second home in Retirement tax questions

How to best handle capital gains from sale of second home

JMB67 — Wed, 26 Jul 2023 17:04:09 GMT

Re: How to best handle capital gains from sale of second home

Katherine S 63 — Wed, 26 Jul 2023 17:12:33 GMT

The best way to make sure you are not paying too much on the sale of a second home is to make sure you include all expenses from the purchase of that home, the sale of that home and all improvements that were made to that home. This then increases the cost of the home. Tax is calculated: Sale price of home - cost= net profit (capital gain). It is also best, if you can, to wait a full year plus one day so that your capital gain is Long Term.

https://turbotax.intuit.com/tax-tips/investments-and-taxes/guide-to-short-term-vs-long-term-capital-gains-taxes-brokerage-accounts-etc/L7KCu9etn

Click on this link or copy and paste it into a browser to learn more about the capital gains rates. This is a great article and has wonderful information about each capital gain rate.

Katie S.

Re: How to best handle capital gains from sale of second home

JBedford — Wed, 26 Jul 2023 17:16:34 GMT

Hi, @JMB67 , thanks for your question!

There's not much you can do to "handle" these capital gains, other than making sure that your numbers are accurate. By this, I mean that you've taken into account everything that might reduce your taxable gain. Your cost basis can be increased, and therefore your gain decreased, by accounting for all acquisition costs of the home, such as legal, abstract, and recording fees. It can also be increased by the cost of major improvements, such as additions or upgrades. And similarly, your selling proceeds can be decreased by sales costs.

One possible way to "handle" these gains is through what's called a like-kind exchange. In the simplest terms, this allows you to defer these gains by "swapping" the property for a similar property. Another might be "tax-loss harvesting", where you offset some of your tax liability by disposing of investment assets that have declined in value.

Hope this helps, please feel free to ask more if not!