How much $$ do you lose when you sell a house (Calif)

scottmandue · 10-01-2015, 12:00 PM

My dad passed away a little over a year ago and left behind a few pieces of property.
My elder brother says if we were to sell "the state takes half in taxes".
At this time we have no interest is selling any of those properties.
However...
When I retire in a few years I am toying with the idea of moving out of the city and possibly selling my house to buy something elsewhere.
If I were to follow through on that idea how much would I lose by selling?

look 171 · 10-01-2015, 12:24 PM

Why not live in them for two years (primary res) and take the 500k tax break before you retire. Yes, they take a chunk.

Are they in good shape and what part of the city, just curious? I would suggest fixing them to attract a certain crowd and you can make a lot more.

nota · 10-01-2015, 12:34 PM

if you sell and rebuy a like property in a time limit
no tax

if you live in it 2 years
no tax

state as a state or feds ?
I think for the feds you get to start at the value when acquired
not what you dad paid long ago
unsure on state law on capital gains

look 171 · 10-01-2015, 12:39 PM

Quote:

Originally Posted by nota

if you sell and rebuy a like property in a time limit
no tax

if you live in it 2 years
no tax

state as a state or feds ?
I think for the feds you get to start at the value when acquired
not what you dad paid long ago
unsure on state law on capital gains

No tax for only 500k if married. 250k if single. Scott, do a 1031 exchange and buy a mansion with a barn to park all your toys.

look 171 · 10-01-2015, 12:40 PM

Scott, you leaving paradise? Where are you planning to go after retirement?

look 171 · 10-01-2015, 12:42 PM

You can always left it empty and change out your address and lic to get the tax benefit. Its a lot of cheaper then having to pay the tax on it. Heck rent your home out and live in that for two years and rotate them to all the others. They are in nice areas? Socal?

CalPersFatCat · 10-01-2015, 01:21 PM

Quote:

Originally Posted by look 171

No tax for only 500k if married. 250k if single. Scott, do a 1031 exchange and buy a mansion with a barn to park all your toys.

Get on the same page RIGHT NOW with all of your siblings.

California hates it when you trade a California property for an out of state property. As a matter of fact, the CA legislature has enacted a statute that requires you to file an addendum to your taxes EVERY YEAR stipulating that you still own the property, FOR THE REST OF YOUR LIFE. If you fail to file the tax addendum, then a state tax on the gain becomes due immediately. So essentially, if you "leave" CA, CA will haunt you for the rest of your life (and your heirs) waiting to get their tax. As far as I know, CA is the only state that does this.

I just traded a CA 4 plex for a 38 unit in Cincinnati. You will need to hire a 1031 exchange intermediary to facilitate the transaction. It will cost you less than $800 (its a flat fee).

My monthly gross on this particular exchange went from $3,800 (CA) to a little over $15,000 (Ohio). After the property is rehab'd I will push that gross to $17,100 (with no section 8). My point is, if you don't mind working a little bit (property management), you can trade your CA appreciation play for a cash flow play very easily by moving from CA to any number of Midwest cities, such as Cincy, Akron, Toledo, Columbus, Indianapolis, Memphis, Kansas City, or even Milwaukee.

As others have mentioned before me, you and your brother (and other siblings) need to owner occupy each of those properties immediately for 24 months and then sell them off, one by one.

Otherwise, you will be in the landlording business for the rest of your life. and that's definitely not for everybody...

porsche4life · porsche4life's Garage

I'd suggest consulting a tax attorney.... With it being inheritance I'm not sure how that works with the capital gains. Worth a few hundred in consultation fees to make sure it's done right. But yes if it's been your primary residence for two years, you can dodge some of the taxes.

Noah930 · Noah930's Garage

Not a CPA, but I believe the tax break is if you own the property for 5 years and call it your primary residence for at least two. Then the first $500K (married) or $250K (single) profit is not taxed. Not familiar with what happens in an inheritance type situation, though.

scottmandue · 01:53 PM

Sorry, let me clarify... not selling dad's (now mom's) property (two commercial properties) we need the rent off those two properties to pay for mom's care/expenses.

Curious how much tax they will take on my residential if I were to sell it and move on in a few years if I retire. (Owned and have lived in that house for over ten years).

Quote:

Originally Posted by porsche4life

I'd suggest consulting a tax attorney.... With it being inheritance I'm not sure how that works with the capital gains. Worth a few hundred in consultation fees to make sure it's done right. But yes if it's been your primary residence for two years, you can dodge some of the taxes.

Great advice! Retirement is still several years down the road... but that doesn't stop me from daydreaming

when the day comes I will seek professional advice.

Quote:

Originally Posted by look 171

Scott, you leaving paradise? Where are you planning to go after retirement?

And there is the rub... where would I go? My whole life (58 years) in the big city I am just getting an itch to downsize... but it is a big roll of the dice... and when I'm over 60 don't want to jump around trying to find something else that fits. The only places that actually have better weather (Hawaii and San Diego) are also the only places that a higher cost of living... and San Diego is still the big city.

look 171 · 10-01-2015, 01:49 PM

Ok, I wold kick out tenant and leave that empty to get the tax break. Talk to your tax man about that. I remember talking to my CPA about multiple units not getting the full 500k tax break. I am not selling those anytime soon so i have kept up to date. you might spend a few bucks on a remodel for better selling price, but you pay for it in tax so you have to talk with the tax man about it.

Tobra · Tobra's Garage

They take a chunk of whatever you get for the property, less what you have in it.

For example, you pay $200,000 for property, spend $100,000 improving it and sell it for $900,000. You get $500,000 exempted from tax, pay capital gains on $100,000. Cali is going to tax the heck out of that $100,000. I think this is a one time exemption, so you can't do it again if you move into another house for a few years and sell it at a profit.

You are going to want to speak to your tax guy before you do anything. May want to set Mom's property up in a trust.

Maybe ask Hugh to talk to his wife. She is smarter than any accountant you find is likely to be.

tabs · 10-01-2015, 02:00 PM

U need an informed opinion on your particular situation and not a less than professional opinion from folks who do not know all the particulars of your situation. What are u trying to save a buck, that isn't even being penny wise in your circumstances.

scottmandue · 10-01-2015, 02:03 PM

Dad setup a living trust a long time ago.

My older brother and I are in agreement that we are going to keep all their property and just collect the rent.

However my house could be up for grabs if I decide to move on for greener pastures (if there is such a thing) as in sell what I have been living in to buy a new residence.

We have a good tax guy, will ask him when the day comes.

tabs · 10-01-2015, 02:09 PM

Quote:

Originally Posted by scottmandue

Dad setup a living trust a long time ago.

My older brother and I are in agreement that we are going to keep all their property and just collect the rent.

However my house could be up for grabs if I decide to move on for greener pastures (if there is such a thing) as in sell what I have been living in to buy a new residence.

We have a good tax guy, will ask him when the day comes.

Should ask now so u don't get any surprises. Then you can make informed plans

look 171 · 10-01-2015, 05:19 PM

Quote:

Originally Posted by scottmandue

Sorry, let me clarify... not selling dad's (now mom's) property (two commercial properties) we need the rent off those two properties to pay for mom's care/expenses.

Curious how much tax they will take on my residential if I were to sell it and move on in a few years if I retire. (Owned and have lived in that house for over ten years).

Great advice! Retirement is still several years down the road... but that doesn't stop me from daydreaming

when the day comes I will seek professional advice.

And there is the rub... where would I go? My whole life (58 years) in the big city I am just getting an itch to downsize... but it is a big roll of the dice... and when I'm over 60 don't want to jump around trying to find something else that fits. The only places that actually have better weather (Hawaii and San Diego) are also the only places that a higher cost of living... and San Diego is still the big city.

I am like you, spend a huge part of my life here in shorts and tee shirts daily. Forget the heavier jackets and other cold climate clothings, pants will just kill me if worn more then one day. San Diego is really nice, but is there a real difference compare to where you are, besides having to deal with a tenant and a bit of traffic? Retirement also means picking your own hours to have breakfast, go when traffic dies down so there's really no traffic, especially where you are. Hawaii is nice, but I think I would get Island fever. It would have to be in O'ahu. The big island or Maui will kill me with nothing to do. My wife will strangle me first.

My good friend and I are exactly the same age and have been talking about retirement. He lived across the street from me since the third grade and is set on condos in Hawaii. They have been condo shopping for the past year and plan to keep his house here for his daughter. We are a couple of years from 50, so when he actually retires, the transition will be smooth as stuff are being move over there slowly and the condo will be paid for in 15 years when he's done. Our plan is to stay put and make up the numbers and add to the traffic congestion during none traffic hours.