Thanks to all who answered this question. I'm obviously
oblivious to these kinds of tax law changes. This is in
large part due to the fact that we've lived in the same
house for 16 years and actually had no intention of moving.
Unfortunately, my wife became partially disabled in the last
two years and we find ourselves having to move to house that
has less than 3 1/2 stories. So, we hadn't been keeping up
with tax law concerning sale of homes.

Thanks again.

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Fearless wrote:

- quote -

The rule is: you must own and live in your principal
residence for 2 of the previous 5 years. If you have met
this rule, you may keep up to $250K for single or $500K for
married filing joint before you pay any capital gains, or
even report it for that matter. So this being the case it
sounds like you have 3 years to sell the old house. It
doesn't matter what the new house costs or is worth.

Missy Doyle

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- quote -

The law about deferment of gain on the sale of your house
because you buy a new one costing more was drastically
changed several years ago. Now you can exclude (never pay
taxes on) the gain under very liberal circumstances. See
Pub 523.

--
Don EA in Upstate NY

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- quote -

Deferring the capital gain on a house by buying a new house
was eliminated in 1997. It was replaced by an exclusion of
up to $500,000 of the gain if you are married filing jointly
($250,000 if not MFJ) provided that you owned and lived in
the house for two of the last five years preceding the sale.
So, assuming you have lived in your current house for at
least two years, the deadline that you have to worry about
is three years after you move out. How much you pay for your
new house, and when you take ownership of it, have nothing
to do with the exclusion.

Bob Sandler

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Fearless wrote:

- quote -

There is no "capital gains deferment" anymore. If you live
in a house as your principal residence for two of the last
five years you are exempt from the first $250,000 of cap
gains when you sell ($500,000 for a couple).

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Fearless wrote:

- quote -

You are referring to old tax law that deferred gain if you
bought a newer home within two years of the sale and the
price was higher than the one you sold. See IRS Pub 523 for
the new tax law that lets you exclude $500,000 (joint
return) of gain if you both used the home as your main home
for at least two years when you look back five years from
the closing date and at least one of you owned that home for
at least two years during the same look back period.
http://www.irs.gov/publications/index.html

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Fearless wrote:

- quote -

Assuming you lived in the old house for at least 2 years
before you move out, you have 3 years from the time you move
out to close on the sale of the old house and exclude (not
defer) $250,000 of gain ($500,000 on a joint return if both
spouses meet the 2 year 'lived there' test).

Good luck.

Bill

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feldesmanm[at]gmail.com (Fearless) posted:

- quote -

The "capital gains deferment" treatment for sales of your
main home, was ended some years ago (1997, I think). Now,
you are simply permitted to retain any gain up to $500,000
for MFJ (Your did say "we."). That permission is available
for anyone who has owned and lived in their main home for at
least 2 years out of the past 5 years.

So, as long as you sell your current home within 3 years
after you eventually move into your "new" main home, you can
keep any profits below $500,000 -- and you need file no
report. None at all. But keep your records for the
original cost and closing statement for the sale, along with
your tax return for the year when the home is sold -- for at
least 3 years from the date-of-filing deadline for that
year.

Bill

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"Fearless" <feldesmanm[at]gmail.com> writes:

- quote -

What "capital gains deferment"? "Capital gains deferment"
has been dead since May 5, 1997.

In its place is the exclusion rule. If you own and occupy
a house as your primary home for any 24 of the 60 months
prior to the date the sale closes, you can exclude $500,000
of gain from taxation on a married-filing-jointly return
($250,000 otherwise). If you fail the 24-of-60 test by even
a single day, the entire gain is taxable, unless you moved
for certain health or job-related reasons, or for certain
"unforseeable" reasons.

- quote -

How much the new house costs and what you do with
the sales proceeds of the old house is completely
irrelevant to the tax situation.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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"Fearless" <feldesmanm[at]gmail.com> wrote:

- quote -

You're about 9 years behind on the tax law. There is no
more deferral of cap gains through purchase of a more
expensive replacement residence. Now there's a generous
exclusion of gain if you meet certain requirements. See IRS
Publication 523.

--
Phil Marti
Clarksburg, MD

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Fearless wrote:

- quote -

First, it is not a deferment -- it is an EXCLUSION of
capital gains tax (BIG difference!). The law on home sales
changed dramatically in 1997. As long as, at the time of
sale of the old house, you OWNED and LIVED IN that house as
your principal residence for 2 of the 5 years prior to sale,
you qualify for an exclusion of up to $500,000 of the gain
($250,000 if Single). Whether you buy a new house, or when,
is not relevant to the exclusion.

- quote -

Not relevant; not a condition of the current tax law.

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We are building a new house that will be finished in late
September or early October. We don't need to sell our
current house to complete the new transaction. Our plan is
to sell after we move out. Since the new house will be
closed before the old house sells, how long do we have to
sell the old house before we lose the capital gains
deferment on the sale. New house is expected to come in at
about twice the selling price of the old house?

Thanks.

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