Capital gainz and 2 years to buy myths?

[Jesse Jaymes]

General question. I am sometimes floored I am so uneducated on many things. But there are so many things I give zero schits about. Hopefully an easy question.

I had a primary residence for just over two years. Sold it. Did pretty well on the investment. Just missed what I think are called capital gains tax. Maybe cleared $240,000. Not the $250,000 cut off.

I have been renting and have no need to purchase another residence at this time.

WHere does this urban myth come from that I have two years to "burn" that money on another residence or property? Any truth to this?

Could I burn it all if I wanted? Hunt the world, pay cash for a new truck, etc?

What taxes or penalties am I facing?

 

[jofes]

Fairly confident you have to roll it into another property to avoid the taxes, if you are still in the taxable window, if I'm wrong, do a sheep slam.

 

[timekiller13]

It’s no longer the case.

As long as the home was your primary residence and you met the exemption qualifications listed on IRS website then you won’t be taxed even if you don’t buy another home.

 

[Tahoe1305]

From my knowledge that is not true.

IF you used it as your primary residence for 24 months of the last 5 years(can be prorated) then you get $250k tax exempt (per person….married is $500k). There is no requirement to use that $$$.

If you didn’t use it as your primary residence and it was an investment property. Then the 1031 exchange could apply and that has a time limit on when that capital gain must be re invested in another investment property.

Some actually tax lawyer may chime in and make some corrections. But I’ve been doing this for a bit and haven’t had an issue.

 

[Jesse Jaymes]

Thanks for the insight so far. I've just hit the one year anniversary. I am looking for property to purchase daily. Nothing I see fits my dreams.

But want to make sure I don't need to burn this in the next 360 days or lose my scalp on it.

 

[mxgsfmdpx]

No. You would have already paid taxes on the amount realized for the sale of your primary home. You do not owe anything over $250,000 of the amount realized.

In your case you owe zero and have no time table to “re-invest” that money in housing.