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.

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.

Blow it on hookers and coke...

$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.

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.

911.

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.

Hey, that ain't bad! Better than losing $20K! :) 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.

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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

Well that's a good point. I have spent a bit on thios place already but that is in the mix of things to pay off. I do have some improvements to make here though that we have put on hold while we waited foir the other place to sell.

pwd72s..thanks I needed that. Good advice.

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%

thank you for starting my day falling on the FLOOR LAUGHING! LMFAO!

You left out booze!

This is probably true in your case, but to clarify the point...the tax codes are almost never quite that simple.

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).

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/

That brings up another question. Will my net net proceeds be taxed as income?

No, they will not.

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.