• Question
  • Buying another residence to live by using capital gain $

    Asked by someone from Los Altos, CA on 2/18/2013

    We are selling our primary residence after living 25 years. We will realize capital gain more than $750k. Can we use $250k( after $500k exclusion) with out paying capital tax on $250k to buy town home for living in senior years. This town home is much lower value than our older home.

    Q2: What is the Property tax on town home if the price is $750k in northern California?

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  • Categories: Taxes, Downsizing/Relocation, Housing, Tapping home equity

Answers

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  • To answer your first question, you can use capital gain money to purchase a house, but you have to pay capital gain tax on $250k. However, the bright side is that you don’t have to pay capital gain tax on your $500k capital gain. On the other hand, some home improvements, such as those deemed medically necessary, can provide tax deductions. Check with a qualified CPA about the specific town home and your specific needs and it’s possible (though the circumstances have to be just right) you can find other ways to reduce the impact of the capital gains taxes.

    For your second question, California property taxes can be complex. A part of your tax will be assessed on the purchase price at 1% that will adjust upwards annually at no more than a 2% increase. However, there will be other local taxes that will vary from county to county in addition. It’s best to speak to a qualified local advisor or contact your county assessor you can find here: http://www.boe.ca.gov/proptaxes/taxcol.htm.

    Further information about California’s property tax system can also be found here: http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx

    This answer is provided as general information only and provided by Master’s students pursuing a degree in Personal Financial Planning at Texas Tech University. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or Certified Financial PlannerTM as to your unique financial situation.

  • Login to rate this answer:   Answered on 5/10/2013
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.