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Capital Gain on Sale of Home
Old 09-27-2020, 05:40 PM   #1
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Capital Gain on Sale of Home

Assume I sell my home and I have a capital gain of $100,000 on the sale. This is after using my $250,000 exemption and increasing the basis by the cost of major improvements - finishing the basement and building a screened-in porch.

Couple of questions about the tax treatment of the gain:

1. I've owned the home for 25+ years. Please confirm that the gain is long-term.

2. Please confirm that I report the gain just as I would the gain on a stock or ETF - on Form 8949 and Schedule D.

3. Now the biggie. Assume I have $20,000 in carry-forward losses from the sale of stock in a previous year. Please confirm that my $100,000 gain is reduced to $80,000 after using the carry-forward loss. In other words, even though the two assets (home and stock) are very different, one can offset the other since they both find their way on to Schedule D.

Thanks!
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Old 09-27-2020, 06:24 PM   #2
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Haven't done any research to confirm, but everything that you wrote seems right to me... long-term gain and can use loss carryforward. Seems like at the end of the day you would owe 15% (or more if high income) on $80k of gain. YMMV.
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Old 09-28-2020, 03:35 AM   #3
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From IRS Pub 523 seems to cover #1 and #2.

#3 is probably correct, but I would just fill out turbotax and verify.

"If you have gain that can’t be excluded, you generally must report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040 or 1040-SR), Capital Gains and Losses. Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home."
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Old 09-28-2020, 04:28 AM   #4
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I thought the carryover of capital losses from a stock sale was limited to $3k/yr.



Cheers!
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Old 09-28-2020, 05:37 AM   #5
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Quote:
Originally Posted by Badger View Post
I thought the carryover of capital losses from a stock sale was limited to $3k/yr.



Cheers!


I think the limit is applicable to ordinary income. No limits on capital G/L offsets.

Housing exemption should be $250k single, $500k married. This doesnít apply to second homes.
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Old 09-28-2020, 07:55 AM   #6
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I think the limit is applicable to ordinary income. No limits on capital G/L offsets.

.................
WhenIsItTime is correct. Suppose you have a capital loss of 20K this yr and 5K capital gains. You net them against each other and have a capital loss of
15K. You can only use 3K of that remaining loss this yr against ordinary income(but also used 5K of it against your gain).

You carryover 12K of the loss to next yr. If you have 20K of capital gains next yr, you can use up all 12K of the carryover loss and have 8K of capital gains that is taxable.

See Sch D for the steps and order that is used.
https://www.irs.gov/pub/irs-pdf/f1040sd.pdf

In pt I & II you see short term gains/losses and long term gains/losses netted against each other (including carryover losses) but there is no limitation on the use of the carryover losses. The limitation occurs later in Pt III line 21.
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Old 09-28-2020, 08:15 AM   #7
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Quote:
Originally Posted by Badger View Post
I thought the carryover of capital losses from a stock sale was limited to $3k/yr.



Cheers!
$3k limit is only as an offset to ordinary income... offsets to capital gains are not limited.
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Old 09-28-2020, 11:03 AM   #8
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Thanks, I need to save this for the next time I have capital losses. In the past I have had capital gains greater than $3k that the carry over of previous years capital losses only covered $3k leaving more carry over for the next year. I have had my taxes done by AARP using Tax Cut or some other computer software.


Cheers!
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Old 09-28-2020, 11:25 AM   #9
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Thanks, I need to save this for the next time I have capital losses. In the past I have had capital gains greater than $3k that the carry over of previous years capital losses only covered $3k leaving more carry over for the next year. I have had my taxes done by AARP using Tax Cut or some other computer software.


Cheers!
Tax-Aide currently uses TaxSlayer; previously it used TaxWise. You might want to take a second look at your past situation to be sure it was as you think. Preparers need to be certified each yr and it seems unlikely (but certainly possible) for that error to be made esp. since the software does remember prior yr carryovers.
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Old 09-28-2020, 11:42 AM   #10
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Originally Posted by Badger View Post
Thanks, I need to save this for the next time I have capital losses. In the past I have had capital gains greater than $3k that the carry over of previous years capital losses only covered $3k leaving more carry over for the next year. I have had my taxes done by AARP using Tax Cut or some other computer software.


Cheers!
If that's true then you got screwed.

Basically, the loss carried over to the next year acts like a loss on a sale on Jan 1 of that year. If you carried over a $50,000 loss from 2018 to 2019, that $50,000 can be used to offset any gains. If you don't have enough capital gains to cover it, you can take a loss of up to $3000 against other taxable income. Anything beyond that is carried over to the next year. So if you had $20,000 in gains in 2019, you use $20,000 of your loss to zero that out, another $3,000 against other income, and you carry $27,000 over to 2020.

Take a good look at schedule D when you have a loss carried over.
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Old 09-28-2020, 12:11 PM   #11
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If that's true then you got screwed. ...
But if it was relatively recent then you can amend past returns and get back to where you should have been.
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Old 09-30-2020, 07:36 PM   #12
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I believe the $250,000 exclusion applies to a primary residence. If the house in question is a primary residence, I donít believe you can adjust the basis for capital improvements.
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Old 09-30-2020, 08:12 PM   #13
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Of course you can....
Quote:
... You must increase the basis of any property by:
  • the cost of any additions or improvements ...
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Old 10-02-2020, 06:18 AM   #14
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You might actually be money (and sanity) ahead by hiring a tax professional for this sort of issue. Sold primary residence which had also been a rental in recent past. There was depreciation recapture as well. SO glad to have a tax professional deal with the whole mess. Fortunately, DW and my exemptions added to more than the gain, but did get burned on the recapture. YMMV. Best of luck.
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