USA CAPITAL GAINS ON HOME SALE.


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Jan 16, 2021
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Hello,

I was wondering if someone could help with whether I would have to pay a penalty of Cap gains on the selling of our home if we use the money to pay off debt.
I saw something stating a family of 4 would have to go over 500k before having to pay. Our income is 80k and home equity is around 150k. Does that mean we don't have to pay or is there still a penalty if we don't roll the money into another home.
Thanks for the help!
 
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Joined
Dec 19, 2020
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I don't know where you received your tax facts from but here are the rules -
In order to avail yourself of the $ 250,000 (single), $ 500,000 (MFJ) exclusion on the gain of sale of residence, you must own the residence for 2 out of the last 5 years, AND MUST use the house as your principal residence for that period of time.
What you use the proceeds for is completely irrelevant and has nothing to do with reducing the taxable gain on the sale.
And gain on the sale has nothing to do with your income other than if you don't qualify for the exclusion, the capital gain tax rate is based on your total income.
That rollover to another home rule went out the window with the Tax Reform Act of 1986.
 

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