Capital gains tax when you sell your home

Will you owe income taxes when you sell your home in New Jersey?

Capital gains tax is tied to how long you have owned your home and how long you  have lived in it.

The following question was asked and answered NJMoneyHelp.com

Q. I bought a house in December 2016 and I expect to sell it in June 2020 for $745,000. I’m moving to North Carolina for a job. The exemptions for the exit tax confuse me, including the line that says “you must have used the home that was sold as your primary residence for two out of the last five years.” I haven’t had the home that long, and I file taxes married filing jointly.
— Moving

A. Congratulations on the new job.

On your move, taxwise, you should be okay.

The State of New Jersey follows the federal government when it comes to the sale on a home.

Internal Revenue Code Section 121 gives an exclusion of up to $250,000 of capital gain from the sale of your main home or $500,000 if your filing status is married filing jointly, said Cynthia Fusillo, a certified public accountant with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

There are two tests to qualify, she said. One is for ownership and the other is for use.

“You must have owned your home, and used it as your main home, for a period totaling at least two of the most recent five years immediately prior to the sale date,” Fusillo said. “Based on the fact pattern you provided, you should be eligible to exclude the expected gain on the sale of your home.”

She said you will have to report the sale on your tax return for the year of sale based upon the expected sale price.

However, the resulting gain, if falling within the $250,000/$500,000 parameters, will not be taxed, she said.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published on March 12, 2020.

Remember to always seek advice from a personal professional tax and legal advisor who understands your unique individual circumstances.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

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Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

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Year-end dash to sell real estate

The year-end is approaching and with it some tax law changes. Add some confusion to the mix, such as the so-called Obamacare sales tax on real estate, and we can see why there’s a flurry of year-end activity, perhaps the greatest since 1986.

As the The New York Times Alexei Barrionuevo points out in A Mad Dash to Avoid a Bigger Tax Bite

NOT that anybody needs more stress during the holiday season, but sellers and their brokers and lawyers across the country have been scrambling to close deals and avoid January tax increases that will eat into their profits.

What's driving this rush?

 What is everyone so worried about? Federal capital gains taxes — the tax you pay when you sell an investment — are expected to rise at the top rate from 15 percent to at least 23.8 percent. That would include a 5 percent tax increase and a new 3.8 percent tax on investment income levied on high earners to pay for health care.

While no one knows exactly what will be decided in Washington to avoid the fiscal cliff, many people expect that the cost of selling an investment will be higher in January than in December.

There are some options.  The 1031 exchange process might help some owners postpone recognition of gain income.  But I'm not here to offer tax advice

Good luck to all those folks intent on closing before the end of the year.  It's less than a working week away.

Read the full report here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Capital gains tax on the sale of your home?

Ask the Biz Brain found in the Star-Ledger answers a question about the payment of capital gains tax upon sale of your home. It’s a worthwhile article, so it’s set out in full.

Q. I plan to sell my house in the spring of 2012 and relocate to another state. After I get a job and become familiar with the area, in about 18 months, I would like to buy another house. How long can I wait to buy a house before I have to pay capital gains on the money? Where would be a good place to invest or put the money until that time? -- Homie A.

The Brain hopes the housing market sees an upturn before your target selling date. But then again, a housing recovery will mean a higher purchase price for your new home.

If you are single, you can sell your home and any gain up to $250,000 is not taxable, and you do not have to ever buy another house, said Alan Meckler, a certified financial planner with Cornerstone Financial Group in Succasunna. If you are married you can exclude up to $500,000 in gain.

Meckler offers this example: If you are single and you originally paid $250,000 for your house and over the years you spent another $100,000 on improvements, the cost basis in the house would be $350,000. If you now sold it for $550,000, that would be a net gain of $200,000.

“You would not owe any capital gains or any form of taxes,” Meckler said.

You are also under no constraints to ever buy another home again. This law came into effect in 1997, under the Taxpayer Relief Act of 1997, he said. As always with tax rules, there are other qualifications you must pass.

“The individual or the couple need to have owned and lived in the property as their main residence for at least two years of a five-year period ending on the date of sale to qualify for the exclusion, and they may not have excluded the gain of another personal residence within the two-year period ending on the date of sale,” said Robert Bacino of Insight Financial Services in Flemington.

He recommends you consult with your tax preparer with regard to your particular circumstances in computing the actual gain or loss on the sale of the personal residence -- including state tax laws -- to determine to what extent the federal exclusion may apply and to properly report the sale on your personal federal and state income tax returns, Bacino said.

Now to the cash you’ll have to park after selling your current home but before you buy the new one. Meckler recommends you stay very conservative because you’re working with a relatively short time horizon.

“You could look for a short term CD at the bank or money market account,” he said. “I would not recommend you investing in the stock market unless you had a five-year time frame.”

Good luck with your move, and Jersey will miss you!

If you would like to read the article on line, go here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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