Comments on: Housing and Economic Recovery Act of 2008 REvealed

By: Capital gains taxed now more than ever | First Ohio Home Finance

Capital gains taxed now more than ever | First Ohio Home Finance — Tue, 08 Dec 2009 19:33:25 +0000

[...] out this sample analysis from AgentGenius. You bought a home in January 15 2004 and paid $500,000. This has been your primary residence until [...]

By: D.S.

D.S. — Sun, 04 Jan 2009 03:37:26 +0000

I am confused on what happens if the property was originally a primary residence for several years, later a rental (for longer than 5 years) and then later again (after Jan. 1 2009) becomes the primary residence again. If we then live in the house 2 more years, do we not need to count the rental time, since its original use was as a primary residence, or do we end up wanting to move back to this house ASAP so that our somewhat substantial taxable gains are minimized?

By: Dave

Dave — Thu, 18 Dec 2008 04:16:21 +0000

I purchased a condo in 2002. I lived there until 7/08. I am currently renting the condo with a 2 year lease. If I sold the unit today, I estimate my gain would be $200k. Given current market conditions, let’s assume that my gain on 7/10 is still $200k. Do the 19 months after 1/09 still need to be allocated to the gain, all of which occured before 1/09?

By: Bob

Bob — Mon, 15 Sep 2008 14:52:36 +0000

Sharon, anything will sell at the right price, so if your home still hasn’t sold, you need to examine the price. The only other factor aside from price would be access, meaning you could have had it priced right but a tenant could have created a limited access situation. I’m curious if you tried to sell it before you rented it out. If so, once you put a tenant in to the property, to many agents, that speaks to the willingness to price it right.

I know you didnt ask about pricing advice, but I addressed that first because the tax question is moot if the property doesn’t sell.

The current law hasn’t changed in any way that would increase your time frames on the first property. You could change the dynamics by moving back into it long enough to get back within the 2 out of 5, but you may create issues with the 2nd home if you have to sell it. However, given that you bought the property in 2005, my guess is that capital gains would not be much of an issue, if any.

By: Brad Nix

Brad Nix — Mon, 15 Sep 2008 14:47:27 +0000

Sharon:
There are not any extensions available that I know of. However, it is important to remember that you only pay Capital Gains taxes if you actually have a gain and having a gain in this market is an accomplishment, so paying taxes shouldn’t be considered all that bad. Remember, you only pay cap. gains tax on the amount of gain, not total sales price.

By: Sharon Hubbard

Sharon Hubbard — Mon, 15 Sep 2008 13:05:01 +0000

We are in a predictament. We bought a home in Aug of 2005. We have tried for the last 3 yrs to sell our first home. (2 times we had it on the market while being rented) We still have not sold the property. we are beyond the 2 out of 5 yr timeline. If we sell it now we will need to pay capital gains taxes on 250K. All because of someone else’s mistakes (mortgage co, banks)our home has not sold. The govt is bailing everyone else out but the normal average person who is caught in our situation. Have you heard of anything that has extended the time to sell a property to 5 yrs after you moved out and not 3 yrs in order not to pay capital gains? Could the 5 testing period include that as well? Wishful thinking

By: Community Knowledge is Powerful | agentgenius.com- national real estate opinion column

Mon, 18 Aug 2008 13:43:22 +0000

[...] recently wrote a post about the Housing and Economic Recovery Act of 2008 REvealed, wherein I highlighted a downside to [...]

By: Bob

Bob — Mon, 18 Aug 2008 03:49:41 +0000

Dan, CCH sells their analysis of tax law to CPAs and attorneys (it is a subscription service to help the guys stay current on the law), so you’ll likely find that they’ll agree with this.

By: Dan Connolly

Dan Connolly — Mon, 18 Aug 2008 02:20:52 +0000

Here is another source of analysis on the bill. http://tax.cchgroup.com/legislation/2008-Housing-Assistance-Act.pdf

This article pointed out an important aspect of this, which is that the new law is based only on nonqualified use periods that begin on or after January 1, 2009. So it actually doesn’t affect the plans people have made up until now. The article goes on to say:

In further relief from this new loophole closer, a period of absence generally counts as qualifying use if it occurs after the home was used as the principal residence.

So now it appears that the purchase of investment property that you live in for two out of five years may still work for the capital gains exclusions if you live in it for the first two years. I look forward to hearing some clarifications from a CPA or tax attorney.

By: Bob

Bob — Sun, 17 Aug 2008 16:12:52 +0000

Nice work Linda.