Discussion:Tax responsibility sold principal residence 1 year

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Discussion Forum Index --> Consumer Questions --> Tax responsibility sold principal residence 1 year


FloridaFisherman (talk|edits) said:

5 November 2005
What is my tax responsibility if my wife and I sold our principal residence after 1 year. After 1 unsuccessfull attempt at IVF (In-Vitro Fertalization)we tried again and we were well on our way to a baby, therefore we needed to buy a home that had room for the baby. So we made about $100,000 on the sale and transferred the gain to our new home (not via a 1031)

What will be my tax due, more or less, is the $50,000 we spent on infertility treatments tax deductableFloridaFisherman 18:04, 5 Nov 2005 (CST) Thank you - Jesse

Platinumcpa (talk|edits) said:

7 December 2005
In response to in vitro fertilization, the cost is tax deductible as a medical expense, subject to 7.5% of your AGI. See IRS Pub 502 for more info.

As you probably know, you are allowed a $500,000 exemption on the sale of your home, as a married couple, if you owned and occupied the home 2 out of the last 5 years. Regarding the sale of your personal residence (owning the home for only one 1 year, IRS allows a partial exemption, 50% in your case, if you qualify under any of their 3 exceptions.

These 3 exceptions are: health, change of employment and "unforseen circumstances". Unforseen circumstances include such things as: death in immediate family, divorce, change in employment leaving taxpayer unable to pay the mortgage, damage to home due to a natural disaster, and Multiple births resulting from the same pregnancy. It doesn't say "pregnancy" as an unforseen circumstance, so I don't think your situation would qualify. Pregnancy is a pretty normal occurance.

Given this to be the case, you would pay long term capital gain tax on the $100,000 gain, if you lived in the home over a year, which is taxed at 15% maximum. If you lived in the home for a year or less, it is taxed as short-term capital gain, which is taxed as ordinary income (your income bracket), unless you have some capital losses to offset it. The fact that you transferred the gain to your new home is meaningless now, as the tax laws have changed regarding that.

DZCPA (talk|edits) said:

8 December 2005
I agree.

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