topic Re: Capital Gains Taxes? in Community Chat

Capital Gains Taxes?

LuvSoCal — Tue, 20 Sep 2022 01:03:43 GMT

I have never complained about paying my fair share of taxes. They are necessary if we want our cities, states and country to provide needed services and improvements to our infrastructures. You can't get something for nothing as the saying goes.

I own a modest home that I inherited from my parents (3 br/2 ba) on an 8,000 sf lot. It's the house where I grew up. It was brand new when they purchased it in 1962 and they paid a whopping $15,700.00 for it. I could sell it today for $1,000,000.00.

I have not decided if, at some point, I will move in to it long term or sell. Frankly, I would love to relocate. The only thing that discourages me from going that route is the thought of having to pay capital gains on the profit. I am single so would be entitled to an exemption of $250,000.00. I would, also, have to live there for at least 2 yrs prior to selling.

Can someone explain to me why the government feels it's entitled to a percentage of something that they have invested nothing in? For almost 50 yrs my parents invested a lot of money on the upkeep as I have for the last 11 yrs. since they passed. Realistically, how much of the profit should I expect to pay? I also own a 2 bd/2ba condo that I purchased 30 yrs ago and would sell it, as well. I know if I decide to go forward in the future I would need to contact a tax attorney but any input any of you can provide is appreciated. I'm just trying to think ahead.

Re: Capital Gains Taxes?

september — Tue, 20 Sep 2022 01:10:53 GMT

With the home you inherited, there should have been an appraisal done at the time it became yours. This would have given you the stepped-up value, which I'm sure would be advantageous to you, tax wise. I'm not sure how this can be done, if a lot of time has passed.

Re: Capital Gains Taxes?

kaydee50 — Tue, 20 Sep 2022 01:16:13 GMT

@LuvSoCal I understand what you're saying but you paid nothing for the house and now it is worth a million dollars? Sell it, pay the taxes and move on.

Also, if you have the receipts for all the capital improvements you've made, that will lessen the taxes.

Re: Capital Gains Taxes?

bmorechick — Tue, 20 Sep 2022 01:18:47 GMT

@LuvSoCal I typically don't get into these type of discussions but only am because we recently sold my parents property after my dad moved out. The deed was in my and my siblings name for decades as my parents didn't want a nursing facility to take it in case one or both of them had to be admitted to one. However, we did have to pay capital gains taxes after we sold it, but you can lessen the amount by providing a list of capital improvements, repairs, additions that were made to the home over their lifetime, to include the cost of the home. This is in the state on MD so you would have to speak with your accountant when you file taxes after the sale. There is a special tax form to fill out where you add the total amount of improvements. No receipts are needed, we just sat down and estimated the improvements over the 60 years (new kitchen, new bathroom, patio added, porch added and the estimated costs for the time) you get the idea. It lessened the amount we had to pay by a considerable amount. Hope this helps.

California property is 10x more expensive that here in MD so living there for 2 years may not be a bad idea.

Re: Capital Gains Taxes?

millieshops — Tue, 20 Sep 2022 01:19:06 GMT

@september@ You're right. It might be worth contacting a local real estate lawyer to get help to determine the worth of the house at inheritance time. The $250,000 plus any major improvements made since then will determine the capital gains tax.

@LuvSoCal If you've been renting the house since you inherited it, be sure to discuss that with the lawyer. I don't know enough about that part of the law to say any more.

Re: Capital Gains Taxes?

SilleeMee — Tue, 20 Sep 2022 01:23:13 GMT

If it was me and there was that kind of money then I'd be calling a lawyer.

Re: Capital Gains Taxes?

shoekitty — Tue, 20 Sep 2022 02:01:46 GMT

Here in California if you inherit a home through a trust you can inherit up to 5 million each inheritor without taxes. The starting price of the home is the date of the death. We got appraisals on all moms properties a couple weeks after she died. He went by date of death. We got a full report. We were lucky property went down a month before her death and continued a little drop each month. We paid no taxes. Now when the properties are kept and transferred totally into your name, you pay capital gains accordingly. Each state is different. Here in California you pay taxes on anything over 500,000 profit.over purchase price of home That is after expenses to fix up, long term improvements, and real estate costs. Since most homes here in California sell for over 1,000,000. You deduct price at time of inheritance, your costs and voila'. The rest California takes. So it is good to have a high appraisal at time of death.

Re: Capital Gains Taxes?

Sooner — Tue, 20 Sep 2022 02:13:08 GMT

@LuvSoCal The govt. thinks you've inherited a bundle and they need more money to give away, so why not yours? They are very free with money as long as is coming from your pocket. They are so nice.

Re: Capital Gains Taxes?

Trailrun23 — Tue, 20 Sep 2022 02:35:39 GMT

The answers to some of your questions may vary depending upon your state. In my state, an eldercare attorney helped me file a deed that stopped the state govt from taking almost the entire value of my mother's home as reimbursement for nursing home care....but such a deed is not valid n every state. Definitely see an attorney before selling anything...it will be well worth the investment and may save you a lot of money.

Re: Capital Gains Taxes?

NicksmomESQ — Tue, 20 Sep 2022 03:04:31 GMT

@LuvSoCal My BIL passed away last year & my DH inherited his estate ,which included a home. We hired an estate attorney who also was a CPA.

My DH sold the home 4 months after my BIL passed. He didn't owe any capital gains taxes, because the home's value at the time of sale,was equal to it's value on the date of death.If the home had increased in value,the amount of the increase,would have been subject to capital gains taxes.Since the house was in MD ,if taxes were due it would have been on both the Federal & State levels, since MD is a tax State.It would be based on net income in the year filed. Federal tax would be either 15 or 20%.

Another point: If improvements were made to the house, you would get to apply the approximate cost against the amount of gain. You can also apply all real estate costs & your attorney & accountant fees,against it,too.

I would recommend you speak to an accountant, who can give you specific advice based on your situation & income.

Re: Capital Gains Taxes?

LuvSoCal — Tue, 20 Sep 2022 04:02:25 GMT

Thank you all for the info provided. Yes, I will definitely be seeking the advice of a professional before moving forward.

Based on what I've read here I now know that taxes will be based, in part, on the value of the home at the time it was inherited. That gives me a better understanding of what to expect.

Re: Capital Gains Taxes?

proudlyfromNJ — Tue, 20 Sep 2022 11:01:15 GMT

@Sooner wrote:
@LuvSoCal The govt. thinks you've inherited a bundle and they need more money to give away, so why not yours? They are very free with money as long as is coming from your pocket. They are so nice.

@Sooner I've been paying capital gains on stocks that were inherited since the late sixties. Didn't matter who was in charge, they all wanted my money and still do after all these years.

Re: Capital Gains Taxes?

spumoni99 — Tue, 20 Sep 2022 11:29:44 GMT

If you do a 1030 exchange and buy something else I think that will keep you from paying taxes but I would see an attorney also for the inheritance part you may not owe as much as you think. When my parents died and we sold their home we didn't pay taxes but it was nowhere near that amount 20 years ago.

Re: Capital Gains Taxes?

Somertime — Tue, 20 Sep 2022 12:32:04 GMT

There are two tax basis: Federal and State. Federal tax for Capital Gains regarding real estate are based on estate value of home at time of death less market value at time of sale less any and all capital improvements. Anything over 250,000.00 profit is taxable as capital gains.

You need to speak to a tax expert. You have two pieces of property. he would be the best to tell you what is the most advantageous way to reduce your capital gains. It might be to sell your condo and then wait 2 years or 3 years to sell your inherited property.

Re: Capital Gains Taxes?

vermint — Tue, 20 Sep 2022 13:38:18 GMT

We retired this year, and sold our office building. We were surprised that to AVOID capital gains taxes, we would have to invest the money in COMMERCIAL property again which we would have had to rent out. We expected to invest the money for our retirement, but have zero desire to be landlords. I thought this was grossly unfair, since we were retiring, not relocating.

Thankfully, we have a wonderful accountant who helped us out. Still had to pay the taxes, of course, but less than we thought, by a good margin.

Re: Capital Gains Taxes?

Sooner — Tue, 20 Sep 2022 13:49:50 GMT

@proudlyfromNJ wrote:
@Sooner wrote:
@LuvSoCal The govt. thinks you've inherited a bundle and they need more money to give away, so why not yours? They are very free with money as long as is coming from your pocket. They are so nice.
@Sooner I've been paying capital gains on stocks that were inherited since the late sixties. Didn't matter who was in charge, they all wanted my money and still do after all these years.

@proudlyfromNJ You are so right! They all want it, some more than others, but they all want it. It should have been done away with long ago, and especially since inflation has made it a burden on so many more of us average citizens.

Re: Capital Gains Taxes?

ladyann45 — Tue, 20 Sep 2022 17:07:45 GMT

She really need to find a good tax consultant who is familiar with real estate laws. I do know that after her deductions including taxes she maybe taxed less. She really need to fine the fair market value of that house and look to see what the house was appraised for when she inherited it. The difference between the two will let her know what her capital gaines will be, just saying a figure really don't determine that until all the figures are accounted for.

Re: Capital Gains Taxes?

PhillyGirl23 — Tue, 20 Sep 2022 18:21:28 GMT

They should have put your name on the home before they died. This would have eliminated this entire problem.

Talk to an attorney or banker. This really isn't the appropriate forum.

Re: Capital Gains Taxes?

Porcelain — Tue, 20 Sep 2022 18:35:18 GMT

You need an accountant. A proactive one who knows to explain these things to you before you run into avoidable problems.

One thing our system is set up for is tax avoidance. That is, provided you have the funds and street smarts to pay a decent accountant/lawyer.

Your request that someone explain taxes to you as they relate to funding government seems like an invitation to discuss politics with you. Not interested.

Re: Capital Gains Taxes?

NicksmomESQ — Wed, 21 Sep 2022 03:04:37 GMT

@PhillyGirl23 wrote:
They should have put your name on the home before they died. This would have eliminated this entire problem.

Talk to an attorney or banker. This really isn't the appropriate forum.

I'm sorry to say that's incorrect. My mom put my name on her house before she died. When she passed ,I already owned the house & I owed taxes on the full value of it when I sold it.The only savings I had were the capital improvements that had been made.

If I had inherited the home, I would have only owed taxes on the difference between its value on the date of sale & the value on the date of death. In addition I would also have been able to claim the capital improvements.