It’s tax time and you may have questions if you own a second home and sold it or plan to sell it. Do you have to pay capital gains when you sell a second home? All that depends.
A second home, says HRBlock.com, can include houses, mobile homes, condos, co-ops, trailers, and houseboats. When you sell a second home, Merrilledge.com says you’ll owe capital gains on any profits, with certain exclusions.
If you purchased your home as your primary residence, and it was your primary residence for at least two of the five years immediately preceding the sale, you can exclude up to $500,000 of gains on the sale if you're married and filing jointly, or exclude $250,000 for singles. You can also deduct real estate taxes and points paid to buy your second home.
If you own your second home for more than one year, it’s a long-term capital gain on the profit; a short-term capital gain is on a profit of a second home you owned one year or less.
If you got a mortgage to buy or improve a second home, you can deduct the mortgage interest if you itemize deductions. Your deduction could be limited if your mortgage is more than the fair market value of your home or if the combined mortgages on your primary home and second home are more than $500,000 for single filers or $1million for married joint filers.
Confirm all information with your tax attorney, CPA or tax professional.
While the U.S. wrestles with social distancing and a disrupted economy, you may not feel it’s the best time to buy a home, but you may be missing a great opportunity. Many buyers prefer to wait and sit on the bench, giving you more access to homes with less competition.
The real estate industry is still very much in business, but there have been many changes in how homes are being bought and sold. Here’s what you can expect.
Higher credit scores/down payments are required. News outlets are reporting that some banks, such as JP Morgan-Chase, are requiring higher credit scores as well as larger down payments to limit risk as people lose jobs and the economy wobbles. If you are in an essential business, that’s good, but you may need to sign a statement to that effect.
Virtual showings are the new normal since 2020. Virtual tours have been around for decades, but how they’re different is that your Berkshire Hathaway HomeServices network professional may hold the “camera” themselves, helping you zoom in details, features and concerns as you request them to. They can also conduct open houses, thanks to Zoom or other conference software. You can still see homes in person, but this is a great elimination and selection tool.
Inspections, final walk-throughs and closings are social distanced. To protect appraisers, inspectors, real estate personnel, etc., you may have to stay firmly six feet or more away, wear a medical-grade mask, and use sanitizer or wear gloves.