Home ownership - tax question

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Jun 16, 2002
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hey guys,

i hear that interest on mortgage for your residence (let's say primary residence, no other properties) is tax deductible in the States.

but i hear that capital gains on the sale of your residence is taxed?


Thanks in advance!

-D
 
ouch!

here in Canader, we don't get to deduct the interest on mortgage payments for your primary residence, but capital gains (on your primary) are not taxed.

woo, that's mean. bad IRS!

-D
 
Not a simple comparison.

Remember that some of the money we do not pay in taxes due to mortgage interest deduction will be ours to invest for 20-25-30 years before sale of the residence. It would be complicated for us to calculate the time-related value of the interest deduction vs. the value of being able to deduct capital gain.

Also, in the U.S. the highest rate on capital gains is 15% however, taxable capital gains are taxed at 100% of the gain, unlike Canada where, as I understand it, only 50% of the gain is taxed.
 
Don't quote me, but I do believe that the capital gain tax is only relevent if it is more than $250,000 or $500,000 for a married couple. I've never had to pay capital gain taxes on the 2 house I sold. maybe the feds are after me:eek:

I believe the law changed in the late 90's.
 
I hope you're right gin. That'll mean I get to keep more of the $$$ when I sell my house in a few years.
 
mamav said:
Don't quote me, but I do believe that the capital gain tax is only relevent if it is more than $250,000 or $500,000 for a married couple. I've never had to pay capital gain taxes on the 2 house I sold. maybe the feds are after me:eek:

I believe the law changed in the late 90's.
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If you used the $$ to buy a new principal residence, the gain rolled over. [IIRC - subject to check]
 
creightonfcb said:
That is right! It is called a 1031 exchange, and every state has different laws in how to do it.

Good luck!
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A 1031 Exchange applies to business or investment property, not your personal residence. Also, it's federal, not state. IRS link: http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html

For your personal residence you "may" be able to exclude $250,000 (500,000 if filing joint), as mamav said. One of the rules is that you had to live there 5 years. IRS Link: http://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html

You have to have owned and lived in the home for two of the last five years, plus other rules. If you've rented out some part of your home or used part as a home office, it gets complicated.
 
FallingKnife said:
A 1031 Exchange applies to business or investment property, not your personal residence. Also, it's federal, not state. IRS link: http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html

For your personal residence you "may" be able to exclude $250,000 (500,000 if filing joint), as mamav said. One of the rules is that you had to live there 5 years. IRS Link: http://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html

You have to have owned and lived in the home for two of the last five years, plus other rules. If you've rented out some part of your home or used part as a home office, it gets complicated.
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The is an exception if you have to move because of work.
Terry
 
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