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Posted by
Kristi Teague

If I sell my home for more than I owe, but less than what I paid, will I pay taxes on the difference?

If I sell my home for more than I owe, but less than I paid for it, will I pay taxes on the difference once I pay off the mortgage?

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If I sell my home for more than I owe, but less than what I paid, will I pay taxes on the difference?

By Kristi Teague   
Posted on May 20, 2021 in Topic: Home Selling
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If I sell my home for more than I owe, but less than I paid for it, will I pay taxes on the difference once I pay off the mortgage?
Status: Open
Viewed: 2278
Asked by: Consumer
Posted: 1 year ago
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Diamond
Joe Applewhite
about 1 year ago
I'm afraid I'm out of my league on this one. This a tax man question. My accountant handles all these. I'm happy to put you in touch with him if you'd like.


about 1 year ago
Platinum
James Meador
about 1 year ago
Hi Kristi!

You may or may not have to pay taxes on your capital gains when you sell your house. If you fit the following criteria, you should not have to pay taxes on your capital gains. In Texas, you are allowed to make up to $250,000 in profit if you file your taxes individually or up to $500,000 in profit if you file your taxes jointly (or as head of household) without paying capital gains taxes, as long as you meet all of the following criteria:

-The property must be your primary residence
-You must have owned the house for at least 2 years
-You must have lived in the house for 2 of the last 5 years
-You cannot have claimed exemption from capital gains on another property in the last two years

If you meet all these criteria, you should not have to pay taxes on your capital gains. However, you WILL have to pay capital gains tax on amounts OVER $250,000 if filing individually or $500,000 filing jointly even if you do meet all these criteria.

Also, the capital gains tax doesn't have anything to do with how much you owe on the property, it has to do with how much you paid for the property when you bought it. If you are selling for less than you paid, you should not have to pay taxes on the difference, but I would also suggest you speak with a tax professional!

I hope this helps! If you would like to talk more about this or about selling your home, please call me or send me a text! My wife and I would love to help you and now is a GREAT time to sell!

James Meador and Vanessa Esma
The Stellar Home Group
Re/Max 5 Star Realty
281-450-7199


about 1 year ago
Bronze
Brandy Campbell
about 1 year ago
Hi!

You do not have to pay taxes other than the prorated amount at closing for the year you sell. If you make more than $250,000 on the sale, then you will pay capital gains tax.


about 1 year ago
Bronze
Peter Wright
about 11 months ago
What you are referring to is the Capital Gains Exemption. The answer above are spot-on. To re-iterate and cite another source:

"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." (see source below for links)

You must have owned the home for at least 2 years of the most recent 5 years. You must have used the home as your primary residence for at least 2 years of the most recent 5 years. The use and ownership do not have to fall within the same 2 years of the most recent 5 years, but must all be within the most recent 5 years. This 5 year period ENDS on the date of sale. You cannot claim this exemption of you have already claimed it within the most recent 2 years. So basically, you can claim this exemption every 2 years if you meet all of the above criteria.

You should consult a tax pro to review your individual circumstance. Hope this helps.



Source:


https://www.irs.gov/taxtopics/tc701\n\n


about 11 months ago
Bronze
Syreeta Hartfield
about 9 months ago
It is always best to direct tax questions to a tax professional but I understand your desire to do your own due diligence. I like to go to the source regarding tax questions, so my response is based upon the IRS publication related to your question. Link: https://www.irs.gov/publications/p523 Based on your questions, it doesn't sound like you're asking about County ad valorem taxes which would be prorated at closing. The amount you owe has more to do with whether or not you have a short sale or walk away with cash from the closing than the amount of taxes you would pay. It seems that since you sold for less than you bought it for, there may be no capital gains to recognize. To figure out what taxes you may owe, you can start with the calculation below. To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Subtract the adjusted basis from the amount realized to get your gain or loss. Selling price - Selling expenses = Amount realized Amount realized - Adjusted basis = Gain or loss The publication defines the terms and details how to calculate them. If just looking at the Publication gives you a headache, a tax pro is probably the way to go.


Source:


https://www.irs.gov/publications/p523


about 9 months ago
Diamond
Cagdas Acar
about 9 months ago
Hi Kristi,
As you are selling less than you paid for capital gain tax would not apply; when it comes to the yearly property taxes you will pay the prorated amount according to your closing date. There might be also some situtations that other taxes might apply such as FIRPTA, FIRPTA is a tax law that imposes U.S. income tax on foreign persons selling U.S. real estate. Under FIRPTA, if you buy U.S. real estate from a foreign person, you may be required to withhold up to 21% of the amount realized from the sale. It would be best to consult with tax companies/persons who has expertise on the real estate taxes; the property tax proration is handled by title companies.


Source:


https://www.irs.gov/taxtopics/tc701 ; https://www.global-taxsolutions.com/tax-services/firpta/


about 9 months ago
Bronze
Abbas Naqvi
about 7 months ago
Your adjusted basis is generally your cost of acquiring your home, plus the cost of any capital improvements you made, less casualty loss amounts and other decreases.
Once you have your basis you subtract that from what you sold the house for. If that number is a negative, then there is no capital gain to incur taxes on.



about 7 months ago
Silver
Purvi Shah
about 6 months ago
Many realtors above explained rules for capital gain tax. Please contact professional tax consultant for further questions


about 6 months ago
Bronze
Clinton Turner
about 4 months ago
Kristi,
You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. This can be done every two years I believe. Your best option would be to speak to a licensed CPA and they should be able to answer any tax questions that you may have.


Source:


https://www.congress.gov/bill/105th-congress/house-bill/2014


about 4 months ago
Disclaimer: Answers provided are just opinions and should not be accepted as advice.
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