Do I need to move (Capital Gains issue)?

[TennHokies]

First off, I enjoy my house it's got everything my wife, daughter and I need . . . and even some stuff we just want. That said I can't stand the thought of giving the governament extra tax $ if I don't need to. Our house has almost doubled in value since we bought it 3 years ago (stop complaining I know).

Rough numbers to make things easy, bought for $500K, it's now worth $1M. Even with improvements ($70K) and realitor fees I calculate we'll start owing capital gains tax in a year or two. In 10 years we could easily owe over $100K in capital gains.

I'm feeling presure (put on myself) to looking for a new place just to reset our cost basis. Is this crazy thinking? Do I have any other options? Anyone think the $500K exemption will be going up in the future?

 

[MasterBlaster]

You never know as I don't have a crystal ball.

However in my opinion, Don't look for big tax benefits (like bigger capital gains house subsidies) in the near future. They need to find more taxes to offset the cost of the AMT.

You could make a case to trade your  house under your logic. However the capital gains taxes need to be weighed against an approximate 8-10 percent cost to trade houses. Consider all of the fees - realtor, title insurance, loan fees etc. So just maybe you won't come out all that much ahead if at all.

Also if you live in California (or perhaps other states) your property tax cost basis will be reset at the higher rate.

 

[dusk_to_dawn]

I am of the opinion that, if you can, you take the 500K tax free gain while it is available, and reset your basis. There are many factors to consider and only you can decide if moving is worth all the effort, but a tax free bird in the hand.......is worth how much?

 

[Wizard]

Lock in those gains.

Last time I went food shopping an ex BMW driving real estate agent bagged my groceries. Housing prices have dropped where I live by at least 15% since October.

 

[Wizard]

Oh yeah.  I was in your same situation last year. 

In late August I sold my house to an investor and I stayed in the same house and signed a solid 4 year rental contract.

She called me the other day wanting to break the lease by buying me out.   .  She said the property tax went up in February and she is stretched thin.   

I love calling her about a problem . 
---------------
That could be the cake and eat it to idea.  Sell your house to an investor and stay in your same house as a renter.  Did not have to do anything but sign a contract and take a large check. 8)  Let the housing bubble burst and buy.

That is my plan.  Seems to be working so far.   

However, if the 50 year mortgage goes through - I will have egg on my face because housing prices will go way up and I will be left looking stupid.  But at least I can sleep at night now.   

 

[TennHokies]

Great advice all. Gives me more to think about. It's never a yes or no answer around here which makes the answers all the more valuable. :

 

[Wizard]

My "landlord" just called she wants to have a meeting this weekend about breaking the lease. :.

 

[kaudrey]

Tenn - I'm already in this position. My property has increased in value by about $350K, but I'm single, so my exclusion is half of yours. My BF and I have been discussing marriage, and one of the conversations was "can we live here for 2 years so that we can use the $500K exclusion?"

 

[Wizard]

Not a good reason to get married.

I know I am sticking my nose in your bus, but I just have too.

Money is not everything. Marriage is a major decision.

Good luck.