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neptune2
New Member

Will sell a second house in 2021. It has no mortgage, has been empty for several years. We bought it in 1980 for 36,000. Tax ramifications?

Gain likely 75,000-100,000 over purchase price
2 Replies
tagteam
Level 15

Will sell a second house in 2021. It has no mortgage, has been empty for several years. We bought it in 1980 for 36,000. Tax ramifications?

If you have ever used the house as rental property, you will almost certainly have a depreciation recapture event with which to deal.

 

If the house has always been used as a second home (never "business property"), then the calculation is simple:

 

Selling Price LESS selling expenses LESS adjusted basis EQUALS gain (or loss). In your case, this would be long-term capital gain (taxed at more favorable rates than ordinary income).

 

See https://www.irs.gov/publications/p523#en_US_2020_publink100010751

 

 

You need to ensure that you factor in your basis adjustments, such as improvements made over the years, closing costs, and any casualty losses.

Critter-3
Level 15

Will sell a second house in 2021. It has no mortgage, has been empty for several years. We bought it in 1980 for 36,000. Tax ramifications?

Purchase price + costs to BUY + costs to SELL = cost basis

 

Selling price - cost basis =  long term cap gains  taxed at no more than 20% ( + a possible 3% NIT tax). 

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