Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Primary vs. Second home
My husband and I did things a little backwards...we purchased a house this past January, and after fixing up our old townhouse, are about to list it for sale.
Someone just happened to mention to us that, after a certain period of time, (they thought it was 18 months) the townhouse is considered a "second home" and is taxed differently when we sell it.
Does anyone know anything about this?
Re: Primary vs. Second home
So the relevant code section here is IRC section 121.
Generally, gain is excluded on the sale of a home where the taxpayer has used it as a primary residence for an aggregate of 2 of the last 5 years, the gain excluded is up to $500k for MFJ.
In your case, since the house hasn't been owned very long, a ratio would apply to exclude gain instead. So you will be under 121(c) most likely which is
aggregate period you owned and used the house as a primary residence (divided by) 2 years = your exclusion amount.
So basically you aren't "taxed differently" you just have a more limited amount of exlcusion than the 500k.
If I didn't understand your question right, or that answer is confusing please let me know and I'll try to help you a little more.
IRS.gov is actually very helpful if you search something like excluding gain on sale of your home.
1) Are you making any money on the sale? To find this out you take your Sales Price - purchase price - expenses for the sale (realtor, etc) - any improvements you made at cost. If you have a positive number, then you have a gain.
2) can you exclude the gain on the sale? Here is where the IRS sheet will come in handy. You need to have moved for one of the excluded reasons or lived there as a primary resident for a certain period of time. If you meet these exclusions, then you won't be taxed on the sale.
Extremely helpful - thank you!
DH has actually owned (and lived in) the townhouse we'll be selling for the past 15 years, so it looks like we're covered (for awhile at least.)
Perfect! Good luck with everything!