We are publishing the tax secrets of the .001%

Re:We are publishing the tax secrets of the .001% by rascul on Tuesday June 08, 2021 @04:06PM (#27440069)

Are you referring to this?

> The act permanently exempted from taxation the capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years.

As I interpret the text, the middle-class homeowner will have to live in a home for two out of five years before they can claim an exemption. This matches the experience of my father, who sold his home after about four years and had to pay federal tax on the profit.

Is there something I'm missing or interpreting incorrectly?

[ Parent | on HN ]

Re:We are publishing the tax secrets of the .001% by ineptech on Wednesday June 09, 2021 @01:29AM (#27444526)

You are misinterpreting that part; you can claim the exemption in a house you've lived in for two years. "Two years out of the last five" means you can live in the house for two years, then move out of it (presumably because you bought another house) and rent it for up to three years, and then sell it and still claim the exemption. Even after that, you can sell it and still not pay taxes on it if you use the proceeds to purchase a different investment property (this is the "1031 exchange" that's been mentioned several times).

[ Parent | on HN ]

Re:We are publishing the tax secrets of the .001% by rascul on Wednesday June 09, 2021 @07:50AM (#27446818)

I don't see how our interpretations differ. You showed that there are ways for middle-class homeowners to pay the tax. Sell the house after less than five years and don't use the proceeds to purchase another house. That scenario seems to happen often enough from what I see, and it appears that the IRS will be collecting money in those cases.

[ Parent | on HN ]

Re:We are publishing the tax secrets of the .001% by ineptech on Wednesday June 09, 2021 @10:49AM (#27448544)

> Sell the house after less than five years

You need to live there two years, not five[0].

> You showed that there are ways for middle-class homeowners to pay the tax...

I said... "on their home". If you move out of it and rent it out, it's not your home anymore, it's an investment property, which is taxed differently, as it should be. Regular people (not real estate investors or landlords, people who just own one home at a time) almost never pay taxes on a home purchase[1].

0: https://www.irs.gov/businesses/small-businesses-self-employe...

1: https://www.letmegooglethat.com/?q=do+i+need+to+pay+taxes+on...

[ Parent | on HN ]

Re:We are publishing the tax secrets of the .001% by rascul on Wednesday June 09, 2021 @05:46PM (#27453671)

> You need to live there two years, not five[0].

Thank you. That wasn't clear to me. I interpreted it as you needed to have it for five years and live in it two out of those five. Makes me wonder why my father had to pay tax when he sold his house. But then this is just by memory, he doesn't have his 1040 anymore.

[ Parent | on HN ]