Sale of home

[Seamanjg]

I am retired and have no taxable income. I sold my home where I lived for 1 and 1/2 years in April 2022. After the existing mortgage, real estate agent commissions and other fees were paid, I received a payment of approximately $70,000. During the 1 and 1/2 years of home ownership, I made approximately $50,000 in improvements to the property and retained receipts for this work. I have now used the money from this sale to purchase a new home. What am I facing regarding my 2022 taxes?

[xmasbaby0]

What you did with the profit from selling your home is irrelevant.   The last time you could avoid capital gain tax for purchasing another home with the proceeds of selling your home was in 1997.

SALE OF HOUSE

If your gain was more than  $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return.  Whether you re-invested the gain in to another house is irrelevant.  If you  have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

• If you are using online TT, you need Premier or Self-Employed software to report the 1099-S

[Anonymous_]

The payoff of your existing mortgage is also irrelevant; it does not factor into your gain calculation.

The $50,000 in improvements (assuming they are indeed improvements and not repairs) are added to your cost basis (which will serve to reduce your gain).

[Seamanjg]

Thank you. I am aware of the 2 out of 5 years rule for capital gains. As I wrote, I lived in the house for 1 and 1/2 years and prior to that I was not living in the U.S. What are my tax ramifications? If I received $70K from the sale and have $50K of deductible improvements, do I pay capital gains on the remaining $20K?

[Anonymous_]

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@Seamanjg wrote:

....I received $70K from the sale.....

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Please note that it does not matter what you received from the sale since it appears as if you are including the mortgage payoff in your calculation.

Your adjusted basis is your initial cost plus the cost of any improvements made and you will subtract that figure from your sales price (less selling expenses) to arrive at your total gain.