tax help

[kimba1]

a good buddy of mine maxed out all possible tax advantages and is forced to buy a house to take advantage of the mortgage interest payments.
but isn`t there other venues he can go without buying a possible $800,000 house.
that`s the price of ranch-style 3 bedroom house in san mateo.(that isn`t a crack house)

[Xavier_Onassis]

There is not law that one must buy a house. I doubt that his taxes would be so high as to make buying an $800K house necessary.

[Plane]

In my area ther are a lot of really big houses owned by middle class guys .

Someone who aquired a 800,000 dollar house near New York or Seattle moves here and to preserve his tax advantage in a house sell he wants to buy a house of simular value.

But a 800.000 dollar house near NYNY is modest, that value of house is a big one in town here and is a manse if built in the county.

It isn't a good strategy unless you want to live in a big house a long time , the bigger ones are hard to sell , unless you find someone moveing in from a high value real estate area.

[Xavier_Onassis]

The best strategy is just to buy a house you like that is the size you need. The bigger it is, the more taxes you are liable to pay, and the harder it will be to sell if you must sell it to move to another job. Buying a house for an investment can be a really big problem when they increase insurance rates and property taxes, and there is no way to predict when this will happen. Certainly you can't predict this accurately over a 30 year period. State Farm is requesting a 47% rate increase this year. They are thieves. I have never had one claim, and every year they raise my rates.

A house is not as good an investment as other items, like some mutual funds, because to sell a house at an optimum price interests rates must be low and demand must be high.

This does not happen even half the time.

[Amianthus]

The best strategy is just to buy a house you like that is the size you need.

Unless you have a large capital gain, say from selling a house in a market like NYC, as Plane mentioned.

People dislike paying taxes if they can prevent it by buying a larger house.

[kimba1]

kinda doubt there`s any capital gain since it is san mateo we`re talking about.
it`s most likely the last house he`ll buy in his life.
it`s really a bad time right now to buy a house since everything is going down in price.
unless it`s a long term purchase.

[Xavier_Onassis]

Isn't there some provision that once in your life, you can sell a house and pocket the profits tax-free? I know that this used to be the case.

[kimba1]

strange I know I never heard of such a thing but it sounds familiar

[Plane]

Isn't there some provision that once in your life, you can sell a house and pocket the profits tax-free? I know that this used to be the case.

Yes but do you have t be a certain age?

[Amianthus]

Isn't there some provision that once in your life, you can sell a house and pocket the profits tax-free? I know that this used to be the case.

There's a cap on it. I forget if it's 300,000 or 500,000, or whatever.

[Xavier_Onassis]

There is no age cap on it, as I recall, but there may be a monetary cap.

Once you have made $300,000 or $500,000 profit on selling a home, we are no longer talking about anything that could cause a hardship for anyone. They could only tax the rest of the profits at 33% or so, anyway.

My point is that before someone does something really dumb, like buy a super-expensive house that will have tax and insurance premiums that will likely beggar them in retirement, one should find out exactly how much all possible alternatives will cost them.

There are people now who are losing tens of thousands on an SUV they bought that they only drive 20 miles a day. If they trade it in on a Prius, the savings will never catch up until gas it $12 a gallon in 2020.

[Amianthus]

Once you have made $300,000 or $500,000 profit on selling a home, we are no longer talking about anything that could cause a hardship for anyone. They could only tax the rest of the profits at 33% or so, anyway.

If you exceed the cap, they tax the full amount, not the amount that exceeds the cap.

[Xavier_Onassis]

Once you have made $300,000 or $500,000 profit on selling a home, we are no longer talking about anything that could cause a hardship for anyone. They could only tax the rest of the profits at 33% or so, anyway.

If you exceed the cap, they tax the full amount, not the amount that exceeds the cap.

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Really?

Then that's the price for livin' large.

What is the cap, by the way?

[Amianthus]

Then that's the price for livin' large.

What is the cap, by the way?

My parents had a modest house that they bought for $80,000 in 1975 and it recently sold for over $900,000. Had they lived there during that entire period of time and sold it when my father retired recently, they would be in that position. The house is 1,700 sqft, 3 bedroom, 1 bath on 1/5 acre of land. Hardly "livin' large". Matter of fact, Google Street View has a recent image of the house - now you tell me what a mansion $900,000 buys you in certain markets.



I'm not sure what the cap is, it's either 300,000 or 500,000, last time I looked. The IRS website is available to you as well.

[Xavier_Onassis]

Livin' large could be just living in that house, or passing it on to whomever as a inheritance, or it could be paying the taxes and moving somewhere where houses are priced more reasonably.

It is somewhat annoying when to hear people fuss when good fortune has pushed them into the horrible calamity of making 400% on their money and paying some of it in taxes.