Dear PoPville – Paying Taxes on Home Sale Profits?

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“Dear PoPville,

I sold my house in DC in May for $467,000 more than I paid for it. I know I don’t have to pay tax on $250,000 of the profit since I lived there for 14 years and I’m not married.

I was planning to have a tax professional prepare my 2013 return next year and pay the capital gains tax I owe. Do I have to make any estimated pre-payments to either the IRS or the DC OTR in 2013 to avoid a penalty?

Also, any recommendations for a good person to prepare the return would be appreciated.”

22 Comment

  • Yes you have to pay estimated taxes.

    All you need to know is here: Pay attention to any depreciation you took if you rented out any part of your property as well as any improvements. These affect the basis of your capital gains.

  • if this were taxed… would it be the normal capital gains rate? is that like 20%? Something like that right?

  • gotryit

    Dear person,

    Congratulations on making a bunch of money. Consider spending a small amount of that on professional advice rather than asking a bunch of people who are mostly just sarcastic jerks with no tax expertise.

    Thank you,
    A sarcastic jerk with no tax expertise

  • I think capital gains (profits) of less than $500k on home sales are exempt. Confirm with a tax professional or Google.

  • You “should” pay estimated taxes. But penalties are waived when you are in a first-time situation. So unless you owed a similar amount last year (which presumably you did not), you can just pay in the spring.

    • ah

      To be more precise there is a “safe harbor” based on last year’s taxes. But exactly where that safe harbor is depends on last year’s return. Consult a professional.

      BTW, did you make any improvements to the house? Those may be added to your basis in order to reduce the capital gain.

      • As a CPA, I agree with both of the above comments. Also, jokingly agree with the comment below about getting married before the end of the year 🙂

        If you go that route though, make sure there is a pre-nup! 🙂

  • I believe you are able to roll all of your capital gains forward into the purchase of a new house as long as this house and your new house is your primary residence.

    I may be wrong about this and I havent looked it up, but that is what I recall. Perhaps its only 250k that you can roll forward, I really dont remember.

    Pay a tax lawyer a few hundred bucks or do the research at the IRS, it wont be complicated, you’re not the first person to be in this situation.

    • I believe you are able to roll all of your capital gains forward into the purchase of a new house as long as this house and your new house is your primary residence


      Pay a tax lawyer a few hundred bucks


    • That was the is was before, like 20 years ago. Not anymore, only 250K /per person.

  • Do you have an adjusted gross income greater than $200,000? If so, you may have an additional (federal) 3.8% tax on that $217,000 of non-excluded gain. Estimated payments apply to that tax also. I strongly suggest getting a smart accountant or tax attorney to handle this for you.

    Can you get married before the end of the year? If so, you likely won’t have a tax liability.

  • Also simply call the IRS so that they can detail the legal [actual] process to follow so that whatever other civilians tell you can’t get you in trouble. I called their hotline a while back and they were very helpful for me, and they can’t use the info call against you.

  • Ignore the haters. Congrats! Believe it or not Turbo Tax actually does a very good job of handling capital gains and losses from the sale of real property as well as calculating the cost basis and and depreciation that you’ve been carrying.

    Was it your primary residence and do you plan on using the profits towards purchasing another home within 12 months? If so, it all may be tax exempt.

    • novadancer

      layman tax software is only as good as the user. For instance, (as others have mentioned), the software won’t likely remind you to go thru your files to include improvements to the basis, titile insurance, transfer taxes, etc.

      another PoP CPA 🙂

  • I have my taxes done by Steven Lissner, CPA. He’s in New Jersey, but I’m able to fax/mail/email all the information he needs. He’s excellent at communicating what you need to do in order to mitigate tax burden & is incredibly efficient at preparing my taxes – he does my Federal and D.C. returns – and his price is fair. Here’s his website:

  • anonymouse_dianne

    I also used Turbo Tax in 2010 when I sold my condo and also inherited from my dad’s estate. It handles it nicely and you can efile your federal form for free.

  • I would pay estimated taxes. The potential hassle if you don’t is not worth it. One year I did not for a similar “one-time” event. Although in the end I was able to avoid a penalty, getting a letter from the IRS saying I owed thousands, sending them all of the paperwork to justify my situation, writing multiple letters and explaining myself to IRS employees with varying levels of cognitive ability and waiting for months for a response, was horrible and not worth it.

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