Another tax question regarding principal house and summer home.

[james88]

My house is in ILL for 20 years. I will be retiring to my summer home in northwoods in next year or two. If I sell my house in ILL, the gain is about $100k.

Can I roll all the proceeds into paying off the mortgage on summer home with no capital gains tax on sale of principal residence? How do I make my summer home my new "principal residence"?? Drivers license is in ILL, and will have pension from state of ILL as well.

 

[finn]

I think there’s an exemption to the capital gains if your principal residence is owner occupied for some period. Could be five year requirement in there.

We sold our Illinois house about seven years ago when we moved permanently to our cottage on Portage lake and qualified for the capital gains exemption. I don’t think the rules have changed.

The bonus is that we now qualify for a Michigan homestead exemption for the cottage. Taxes are still high on lakefront property here, though.

 

[buddah2]

There is a one-time exemption from Capital Gains on the sale of principal residence. When we sold our house in OH we were able to take that exemption without having to reinvest the gains. Not sure if there's any limit or cap on amount but we were well under whatever it might have been.

 

[james88]

I think there’s an exemption to the capital gains if your principal residence is owner occupied for some period. Could be five year requirement in there.

We sold our Illinois house about seven years ago when we moved permanently to our cottage on Portage lake and qualified for the capital gains exemption. I don’t think the rules have changed.

The bonus is that we now qualify for a Michigan homestead exemption for the cottage. Taxes are still high on lakefront property here, though.

So did you change your drivers license, etc? You a citizen of Michigan then?

 

[mezz]

I am not 100% certain, but, I believe that once retired, you can have a 1 time sale of a home with no capital gains tax. If you sell a second property, you will then have to pay the tax. Perhaps consult a financial advisor. -Mezz

 

[snobuilder]

To the OP. You can do whatever you want to with the money you realize from the sale of your home after 2 years residency.
There are guidelines for establishing residency in your place up north if you are going to live in more than one place during a calendar year.

I know fellow tradesmen that build a home, live in it for min. 2 years, sell and then build the next, by the 3rd or 4th move they own their home free and clear. Not an easy life but it can be done.
They DO NOT have to reinvest in new real estate if they don't want to. ....after 2 years of residency, there is no CG tax on a sold residence.

I just did a complete rebuild on a house without living in it then sold it. I had the option to reinvest in other qualified real estate to avoid paying CG tax. But if you do that often, the IRS will say you are self employed as a "flipper" and have to pay all sorts of other taxes and SS same as a business.

 

[WorkHardPlayHrd]

To the OP. You can do whatever you want to with the money you realize from the sale of your home after 2 years residency.
There are guidelines for establishing residency in your place up north if you are going to live in more than one place during a calendar year.

I know fellow tradesmen that build a home, live in it for min. 2 years, sell and then build the next, by the 3rd or 4th move they own their home free and clear. Not an easy life but it can be done.
They DO NOT have to reinvest in new real estate if they don't want to. ....after 2 years of residency, there is no CG tax on a sold residence.

I just did a complete rebuild on a house without living in it then sold it. I had the option to reinvest in other qualified real estate to avoid paying CG tax. But if you do that often, the IRS will say you are self employed as a "flipper" and have to pay all sorts of other taxes and SS same as a business.

Depends on the amount of land you own with it. Bought father in laws farm few years ago. They were able to deduct $150,000 off capital gains because it was principle home. Didn't pay 15% Wisconsin capital gains tax because it was sold to direct relative. Still ended up giving $89,000 to federal though.