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What are my tax liabilities for selling my vacation home?

November 29, 2004


Date:  Sat, 23 Oct 2004
From:  Dino

I have a four-bedroom home that I bought in 1997 in Las Vegas, Nevada. It was a rental property from the time of purchase until September, 2003. Since then it has been a vacation home for my personal use.

I have been thinking about selling the property and buying a smaller home/condo and taking the excess equity from there and remodeling my home here in California.

What are my tax liabilities on this type of transaction? If you have any suggestions, let me know. (I am a California resident.)

Answer

Date:  Wed, 24 Nov

Hello Dino,

You haven't provided enough information for me to give you a detailed answer. If you sell the home outright, the gain will be subject to California tax at rates up to 9.3% and federal tax at a 25% maximum rate on gain up to the amount of accumulated depreciation plus 15% for any additional gain. As an alternative, consider exchanging the property. You can limit your gain to the cash that you receive plus any reduction in your debt.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

What are my tax liabilities for selling my vacation home?

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