I live in my house for seven years and is a two family property do I have to pay any capital gains taxes and how is it calculated? I live in tha state of Massachusetts.
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Yes…But if you reinvest your gains into another home within I think 2 years, you can avoid paying taxes for the time being.
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Is this a property with two separate living units? Who lives in each unit?
The unit you live in qualifies as your principal residence. The other unit does not qualify as your principal residence, since a taxpayer can have only one principal residence.
When you sell it, if you sell it to one party, divide the selling price for each unit. The gain on the unit you used as your principal residence qualifies for a $250,000 exclusion on the gain ($500,000 if you file a joint return with your spouse) as long as you (and your spouse) owned and lived in the property for two of the five years preceding the sale.
I need to know what use you made of the other unit. If it was lived in by relatives and you didn’t charge rent, then you will pay capital gains tax (maximum 15%). If you rented it, then you need to figure your gain on the sale of a business asset, and your tax will probably be more than if you had not rented it.
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Were you renting out the other half or was your family living in the entire home? If half was rented, yes there will be capital gains on that portion – it would be a good idea to see a CPA about doing your return correctly. This is NOT one for H&R Block.
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1. For the unit that qualifies as your main home you may be able to exclude gain up to $250,000 (up to $500,000 if both you and your spouse qualifies).
2. If the other unit is rented, then you may have a reportable capital gain.
You can exclude the gain up to $250,000 if all of the following are true.
* You meet the ownership test.
* You meet the use test.
* During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test).
If you can exclude the profit, then you don’t need to report the sale.
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I disagreed with Judy’s answer. H & R Block Tax Associates are quite capable of handling your tax situation. Your half of your property would not be taxable if you meet certain conditions that your earlier answers have indicated. The other portion of your property, which is rented out, would not.