How do I not pay capital gains taxes on the profit I made from selling my second / vacation home?
February 23rd, 2010 | by admin |I am using the profit to build a garage on my primary residence, can I use this to offset the capital gains tax on the 2 nd home I sold? I never lived in the 2nd home, it was a lake house. Also I had to give 1/2 of the profit to my father because he helped pay for the property, but the deed was in my name only.
Nothing you can do but pay the taxes. Unless you qualify for the primary residence 2 of last 5 year exemption, the only way to avoid taxes is to do a 1031 exchange and defer those taxes while buying a new property.
But make sure you make your dad pay his fair share of those taxes too. If he got half the profits, he owes half the tax.
5 Responses to “How do I not pay capital gains taxes on the profit I made from selling my second / vacation home?”
By Yanswersmonitorsarenazis on Feb 23, 2010 | Reply
Nothing you can do but pay the taxes. Unless you qualify for the primary residence 2 of last 5 year exemption, the only way to avoid taxes is to do a 1031 exchange and defer those taxes while buying a new property.
But make sure you make your dad pay his fair share of those taxes too. If he got half the profits, he owes half the tax.
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By ogrendle on Feb 23, 2010 | Reply
Sure, it’s called Tax Evasion. It leads to a very structured life-style in Federal Prison.
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By ninasgramma on Feb 23, 2010 | Reply
Oh, your father got a tax-free gain, but you did not. At least, figure your profit after you pay the taxes, and dad should get only 1/2 of that.
You have to pay capital gains tax on the profit. Get a tax preparer to figure the gain so you pay as little as possible.
Using the proceeds to improve your primary home will not reduce your taxes.
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By 11111 on Feb 23, 2010 | Reply
You cannot do a 1031 exchange on a 2nd home. The property must be non-owner occupied (rental) and she must use the capital gain to purchase another property. That’s why it is called an exchange.
If you are of retirement age you are allowed a one time exemption from capital gains taxes. I believe the age limit is 55. Now this exemption may or may not still be available but it is worth asking your tax preparer or accountant about
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By spicertax on Feb 23, 2010 | Reply
The best way is to do tax planning before you sell something and not later. If you held any stocks at a loss you could have sold them by 12/31 to help offset the gains. Too late now.
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