[USER]

My husband and I bought a house that was too expensive in a town near his parents with the intent to have a village for our three small kids.

This house is in the very expensive northern part of CA and we bought a neglected 1800 sq ft house for $1.25M on a combined income of $385k.

We own another house we planned to rent out that we bought for much less 8 years ago. Anyway, we’ve been renovating for six months and probably have another month until we finish.

We have been back and forth on selling to get out of it because it was just not the best financial move.

We’ve invested about $140k, maybe $125k of which we have receipts to demonstrate permanent improvements. So, almost $1.4M investment.

I plan to talk to a CPA but trying to figure out if we try to list and sell right when summer starts or hold off a little with the intent to close after we’ve owned it a year to reduce capital gains. Since we haven’t rented it out, it would be treated as a second home sale.

Can anyone share their knowledge or experience for what can be deducted from capital gains (documented permanent improvements, real estate fees, other selling fees like staging or closing costs) and how they calculate owning the home dates?

Is it from the date escrow closed when we bought to when escrow closes when the next person buys?

I think the one year makes a big difference in tax rates for capital gains from what I’ve read.

Thanks in advance!

[Becky]

The thing with capital gains.. if you have no gain. You don’t pay. If you have a gain, you still come out ahead.

Don’t use that as the deciding factor for a financial decision unless you are just months away such as living there 20 months already.

But some you haven’t lived there 2 out of last 5 years WILL NOT qualify to exclude the gain.

[Jenny]

The cost basis is all the buying and selling costs plus any improvements you did during the holding period. There is no such thing as second home sale.

It’s either your primary residence which you have to hold for 2 years for the capital gains exclusion or not.

If you sell it under 1 year, it would be taxed at your normal tax rate.

Over a year, it would be long term capital gains tax rate.

[Kelly]

Probably won’t be too much gain on it after a short time with all the work you put into it.

Are you sure you will even make a profit?

[Katie]

How much can you rent it for? Live in the home that you bought 8 years ago and rent out the new house.

[Lori]

IMO , buyers want to buy and move in time to get their kids into new schools for the beginning of the year.

That’s been my experience and our realtor confirmed that for us.

It’s not necessarily a deal breaker but families will consider that aspect.

[Author]

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