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Double Trouble
Join Date: Nov 2002
Location: North of Pittsburgh
Posts: 11,705
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What to do with RE sale proceeds
Recently I sold my house in Florida. The question here is what to do with the proceeds. I was planning on paying my new house off along with all my outstanding debts. This still leaves me with about $20K in profits. My question is what taxes will I have to pay on the proceeds? Would it be wiser to leave an outstanding balance on my new home, put the money aside in a some solid program and make monthly payments from that account? How does the whole capital gains thing work? Are there any tax write offs from the old house such as painting and upgrades done to prepare it for sale that I can use to offset the taxes? I'm pretty stupid when it comes to this kind of stuff.
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I used to be addicted to the hokey pokey..........but I turned myself around.. 75 914 1.8 2010 Cayenne base |
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08-02-2006, 05:28 AM
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Registered
Join Date: Jul 2004
Location: New England
Posts: 5,136
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No capital gains tax on the sale of your primary residence.
Based upon what I can glean about you from your question, I think you should pay off your new house and put the rest in a one year CD. That's the safest and easiest course of action.
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We will stay the course. [8/30/06] We will stay the course, we will complete the job in Iraq. [8/4/05] We will stay the course *** We’re just going to stay the course. [12/15/03] And my message today to those in Iraq is: We’ll stay the course. [4/13/04] And that’s why we’re going to stay the course in Iraq. [4/16/04] And so we’ve got tough action in Iraq. But we will stay the course. [4/5/04] Well, hey, listen, we’ve never been “stay the course” [10/21/06] --- George W. Bush, President of the United States of America |
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08-02-2006, 05:36 AM
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Cars & Coffee Killer
Join Date: Sep 2004
Location: State of Failure
Posts: 32,246
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Blow it on hookers and coke...
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Some Porsches long ago...then a wankle... 5 liters of VVT fury now -Chris "There is freedom in risk, just as there is oppression in security." |
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08-02-2006, 05:36 AM
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Unconstitutional Patriot
Join Date: Apr 2000
Location: volunteer state
Posts: 5,620
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$500k (spouse & yourself) in profit is tax-free.
The answer to your second question is 'it depends.' If you can earn a higher rate of return with an outside investment, you should invest and pay monthly mortgage payments. Do you deduct mortgage interest from your income tax or do you take the standard deduction? Currently, high-yield savings accounts are paying around 5% APY. Money market is similiar and treasuries are also paying around 5%. You probably don't have to worry about capital gains unless you made over $500k profit on the sale of your last home. This assumes you've lived there for the last 2 years. Unlike investment properties, any repairs to your residence are not tax deductible. You get to eat the cost in exchange for the privelege of ownership. Personally, I would just pay off your new home and put the $20k away for a rainy day. Others will advocate investing the proceeds and pocketing the incremental profit. Different strokes for different folks. |
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08-02-2006, 05:40 AM
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Double Trouble
Join Date: Nov 2002
Location: North of Pittsburgh
Posts: 11,705
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I WISH I had made 500K on my last sale! Made just enough to own this place, be debt free (for a while) and have $20K left over.
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I used to be addicted to the hokey pokey..........but I turned myself around.. 75 914 1.8 2010 Cayenne base |
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08-02-2006, 05:48 AM
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Dog-faced pony soldier
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911.
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A car, a 911, a motorbike and a few surfboards Black Cars Matter |
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08-02-2006, 05:48 AM
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Double Trouble
Join Date: Nov 2002
Location: North of Pittsburgh
Posts: 11,705
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We had thought that the 1 year CD was the right thing to do in the beginning. But last night we said maybe there were options. I love this place. I knew I could rely on my brothers for good advice.
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I used to be addicted to the hokey pokey..........but I turned myself around.. 75 914 1.8 2010 Cayenne base |
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08-02-2006, 05:55 AM
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Registered
Join Date: Apr 2001
Location: Linn County, Oregon
Posts: 48,514
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Quote:
 My suggestion is probably the most boring. But it seems to me that many people just can't stand to hang onto any sort of windfall. They just insist on letting that cash slip through their fingers. So here's my suggestion. Take maybe 10%...$2K. Blow it however you wish.The remainder? Put it something safe. That can be a short term CD, Money market, etc. Safe but fairly liquid is the goal. Then take some time. Read, learn more about the various investment instruments...but vow to do nothing with that unspent money for at least 6 months. Your #1 priority should be to quit being "stupid about this stuff". BTW, you're not stupid...you just don't know. You're wise to ask. Now begin to educate yourself. BUY THIS BOOK! Amazon sells it. We have investment books galore here. This one is the best overview of all types of investing that I have read so far: The Bogleheads guide to investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf published by John Wiley & Sons, Inc. BUY THIS BOOK! 
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"Now, to put a water-cooled engine in the rear and to have a radiator in the front, that's not very intelligent." -Ferry Porsche (PANO, Oct. '73) (I, Paul D. have loved this quote since 1973. It will remain as long as I post here.) |
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08-02-2006, 06:07 AM
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Registered User
Join Date: Jul 2003
Posts: 4,247
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do you really have 20K in profits... add up all the costs for this house since you bought it. that is , maintanance, the taxes, insurance, interest costs, etc... just because you sell a house for 500 and bought it for 480 doesnt mean you made a profit of 20K....
but you probably already know this. good luck |
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08-02-2006, 06:11 AM
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Double Trouble
Join Date: Nov 2002
Location: North of Pittsburgh
Posts: 11,705
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Quote:
pwd72s..thanks I needed that. Good advice.
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I used to be addicted to the hokey pokey..........but I turned myself around.. 75 914 1.8 2010 Cayenne base |
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08-02-2006, 06:17 AM
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Registered
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Pay you new house off for sure. Take the rest and put it in a 6 month CD with E-trade. Here are their current rates. The 6 month is a no brainer!!
CDs 3 Month 5.00% 6 Month 5.46% 1 Year 5.56% 2 Year 5.56% 3 Year 5.56% 5 Year 5.61% |
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08-02-2006, 06:23 AM
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Registered
Join Date: Feb 2006
Posts: 4,844
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Quote:
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08-02-2006, 06:28 AM
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Parrothead member
Join Date: Jul 2003
Location: Monmouth county, NJ USA
Posts: 13,831
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Quote:
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Vinny Red '86 944, 05 Ford Super Duty Dually '02 Ram 3500 Diesel 4x4 Dually, '07Jeep Wrangler '62 Mercury Meteor '90 Harley 1200 XL "Live your Life in such a way that the Westboro Baptist Church will want to picket your funeral." |
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08-02-2006, 07:24 AM
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Registered
Join Date: Dec 2002
Location: Worcester County, MA
Posts: 853
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Quote:
If you and your spouse: 1. file jointly, 2. the house was your primary residence, 3. you occupied the house as your primary residence for at least two of the last five years, 4. you did not depreciate any portion of the house for business use (like a home office), Then the above is true, up to $500K in gain is tax free. As far as the rest of your question goes, I'd live debt free and start an investment program for the money I would have spent on the mortgage. Others will tell you this is foolish, but I think being 100% debt free would be liberating (I have only a mortgage as personal debt, and aspire to be rid of it someday). |
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08-02-2006, 07:25 AM
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Unconstitutional Patriot
Join Date: Apr 2000
Location: volunteer state
Posts: 5,620
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Another savings options worth considering is treasury bills. The recent auction put the 28-day at 5.21% and the 182-day is at 5.17% (lower than recent weeks). Treasuries are exempt for state and local income taxes.
http://www.bestcashcow.com/ |
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08-02-2006, 08:00 AM
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Double Trouble
Join Date: Nov 2002
Location: North of Pittsburgh
Posts: 11,705
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That brings up another question. Will my net net proceeds be taxed as income?
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I used to be addicted to the hokey pokey..........but I turned myself around.. 75 914 1.8 2010 Cayenne base |
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08-02-2006, 08:09 AM
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Registered
Join Date: Apr 2000
Location: Mid-life crisis, could be anywhere
Posts: 10,382
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No, they will not.
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'95 993 C4 Cabriolet Bunch of motorcycles |
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08-02-2006, 08:23 AM
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Double Trouble
Join Date: Nov 2002
Location: North of Pittsburgh
Posts: 11,705
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This is all sounding like I did the right thing as I retired coincidently with my move to PA and the sale of the FL property.
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I used to be addicted to the hokey pokey..........but I turned myself around.. 75 914 1.8 2010 Cayenne base |
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08-02-2006, 09:48 AM
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1991 Porsche 911 Turbo 3.3
