So this year I sold my home and made capital gains off of it. I am trying to figure out how to avoid paying the capital gains and some people told me that if I buy another home and fixed it up and rent part of it out to airbnb then I can reduce my capital gains this year with the cost of fixing up the home and buying things like washer and dryer for the airbnb and painting the airbnb home is that true? Also if become an uber driver and buy a car for it will that also help reduce my capital gains because the car would be consider a business expense? and would reduce the capital gains from selling my home this year? Also last year before I was able to sell the home I had to pay off a lien that was placed on my home but I forgot to report it in my taxes would I be able to report it this year as a loss with my capital gains I got this year from selling my home? Thank you
Also the capital gains come from after the 2 year of living in the home as my primary resident.
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If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home provides rules and worksheets. Topic No. 409 covers general capital gain and loss information. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale.
When you receive your 1099S for the sale of the home, you would calculate your basis as the price you paid for the home, PLUS closing costs and any major improvements, then subtract the selling price to calculate the gain amount. Our tax software will let you know if any of the gain is taxable. If there is a capital loss, it is not eligible for a deduction.
If you are renting the home, as in your airbnb example, that would move the transaction to a business property, if you lived in the home for part of the time, then some of the exclusion would apply, however the rental period will change the calculation of the gain. If you are renting the home, you would report that on the Schedule E, and you would be able to deduct expenses and/or depreciate some of the capital improvements. Any business activity such as Uber or Airbnb (rentals) would be considered ordinary income (passive for rentals) and would not be classified as a capital gain.
last year before I was able to sell the home I had to pay off a lien that was placed on my home but I forgot to report it in my taxes would I be able to report it this year as a loss with my capital gains I got this year from selling my home?
And if I use the money I got from selling my home and getting a new home and renting part of it out on airbnb and buying a car with the money from the home I sold and using it as an uber I cant deduct any of it from the capital gains I got from selling my home this year?
Hi - if you sold the home last year, you would need to report the sale on the tax return for the year the property was sold. The lien is not really a factor in calculating the gain. The gain is merely the price paid plus closing costs and improvements - the proceeds from the sale, so for example if you bought a home for 250k, the closing costs when you purchased it were 25k, your cost basis is 250k+25+ = 275k. You sold the home for 350k, so 350k - 275k = 75k gain.
When you take a property and begin to rent it, you would depreciate the property, so the property/asset would be placed in service at the price paid for the property, similar to the calculation for cost basis when you sell a home. Since the capital gain is excluded, you may purchase anything you like with the money. If you decide to purchase business assets with it, such as a car for Uber driving, you would report the income and expenses on the Schedule C as self employment income. The vehicle would be depreciated using the standard mileage deduction or actual expenses incurred during the tax year.
Hello thanks for the reply the home was sold this year but I payed off a lien last year that was on the home so how do I report that this year with the sale of the home since I forgot to report it last year.
So paying off the lien is not a taxable event, so there is no need to report it. The home sale, if it was finalized this year (2022) will be reported on your 2022 tax return. You will just enter your 1099S under Sale of Home on the Income Tab.
https://ttlc.intuit.com/community/tax-credits-deductions/discussion/where-do-i-enter-sale-of-a-home/...
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