Should I sell my house now or wait until the two year minimum capitol gains tax doesn't apply?

Here is my situation. My father in law has given us a couple of acres of land. He’s even given us a house to live in, next to our lot to save money and while our house is being built.
We’ve lived in our current house for a year and three months. That leaves nine months left until we are exempt from capitol gains taxes. However, does it makes sense to make nine months of mortgage payments (about 0/mo) to save what we’d be taxed on??
We figure we have at least K of equity in our home right now. And we could live in our father in laws house for utilities only.
On the same note, we’d like to sell our house by owner – to save the usual 6-7% realtors charge.

Any ideas?? Thanks in advance for your thoughts.
I guess I should also mention that we wouldn’t start building our house for several months so the profits from selling wouldn’t be rolled into another loan – at least not right away.

8 Responses to “Should I sell my house now or wait until the two year minimum capitol gains tax doesn't apply?”

  1. Says:

    Respecting everyone’s opinion, I think many of you are not very well informed about the tax code Sec 121 also known as the homeowner’s tax excemption.

    In order to be exempt from being taxed on you capitol gains from the sale of you primary home, you need to have lived in your property for at least 2 years within 5 years from the date of the sale.

    If you are married you have a total exemption of up to $500,000 and if you are single $250,000.

    If you dont complete the 2 years (they dont have to be consecutive years) any capital gains WILL BE taxed, NO ANDs, IFs or BUTs about it.

    In your situation, you mentioned that it does not make sense to make the mortgage payments to save on taxes. Well I ask you do you rather pay yourself or the IRS??

    By making your mortgage payments, you are building equity and paying yourself. If you sell now, you will pay uncle sam. (Of course, this is assuming you dont have an Interest only loan).

    So if you are still interested in comparing the savings between your monthly payments and taxes, I suggest you figure out what rate you will be taxed at and see if it is worth it. Capital gains are taxed at 15% if the property is held for long term (more than 1 year). This is simply my opinion and you should consult with a CPA or your tax preparer for any tax questions.

    Hope this helped. Good luck

    DISCLAIMER: Any tax information, I have given you is only my opinion and should not be taken as expert tax advice.

  2. MR MONEY Says:

    You get taxed on the profit, not the equity. And you only get taxed if you don’t transfer that money into the next home.

    Don’t worry about it, just sell it and move forward.

  3. abstract_alao Says:

    well 9 months at 900 a month is about 8,000 dollars. If the goverment will take less than that then you should move

  4. Timberuno Says:

    Sounds like you have to many questions, and are to unsure to sell ‘by Owner’…Hire a Realtor, you’ll pay 2.5-3% for a listing agent, but you’ll probably get more outta the home than you will on your own, plus you’ll avoid whaterver tax issues you’re trying to get around without the hassle of an IRS audit later on.
    Be smart, pay a professional, have less stress.

  5. uthomelist Says:

    You need to find out how much more your house is worth then when you bought it. You only pay the taxes on your profit, any money spent on repairs, or fixing up the house can also be subtracted, hopefully you kept the receipts. Closing costs you might pay selling you house are also taken out. So unless you are in a market that is growing fast you probably wont have any capitol gain.

    As far a using a Realtor goes, I would use on, but shop around. you can usually find one that will give you a huge discount 3-5%. In many cases you get more for your house then if you try to sell it by owner and you don’t have the hassle.

  6. Chris10L Says:

    Sell it now if you can save the money and make a profit in the sale.
    You are not going to get taxed on the sale of the house. Only the difference between what you paid for it and what you sell it for.
    Since you stated you have a father in law I am assuming you are married. In which case you have lived in the house for 16 months. You would be taxed on anything above $335,000 ABOVE the cost of the house when you purchased it.
    (500,000 *16/24=335,000)
    Move! Don’t worry about the taxes.

  7. akc1106 Says:

    I’d stay where you are until your house is built. That way you only have to move once, you save on capital gains tax, and your house may continue to appreciate. By the time construction is complete, the 2 year period will have passed anyway so capital gains will not be an issue.

  8. Tara R Says:

    Nine months is not that far away, you could rent it out for a few months if need be. I’m not sure what area you are in but most area’s in the US it will take you nine months to two years to sell by owner. If it sells at all. And do you really want the hassle of selling by owner? I suggest you wait the nine months and sell the house with a realtor. Those folks work hard for their money. But by all means try for sell by owner. But you better get started now.