John Sieling (Today Sotheby's International Realty) Managing Broker Emerald Hills, CA Contact Me

A.

The short answer is see your tax professional.  Realtors are somewhat knowledgeable about tax implications but it's not our licensed field of expertise.

Carla Muss-Jacobs - Principal Broker/ Owner | Exclusive Buyers Agent | (503-810-7192 | BuyersAgentPortland.com) Broker Owner Portland, OR Contact Me

A.

You might be able to shelter the gains in a 1031 Tax Exchange.  I am NOT a tax person, but have used this IRS tax code, the 1031 Tax Exchange to shelter gains of sellers who have income property.  You would need to talk to someone competent in handling a 1031 Tax Exchange. 

Since you are already thinking of investing the profit into another home, it would have to be 'like-kind' (i.e., investment) but with a 1031 Tax Exchange, handled correctly by someone competent in this, this is your best bet.  GOOGLE "1031 Tax Exchange Utah" and see if you can get some direct questions answered.

Hope that helps!

Brett Pehrson (NMLS# 272088) (Advanced Funding Home Mortgage) Mortgage Salt Lake City, UT Contact Me

A.

I'm a loan officer and a tax preparer, so I believe I can answer your question for you and make you aware of something else.  First, you should be aware of the "flipping" concerns related to a new buyer obtaining a loan for this home.  You're near the 90 day minimum most lenders will require for a buyer's FHA loan.  If you do go under contract before that 90 day period, just be aware it might cause some extra work and disclosure on your part; just make sure the buyer's lender is aware of the title "seasoning" issue so it's addressed up front.

To answer your tax question, yes, a taxpayer generally will pay capital gains at his/her short-term capital gains rate unless he/she completes a 1031 Exchange for a "like-kind" property.  You'll need a 1031 exchange accomodater to help you out with that; this is typically going to be an attorney, accountant or title company who would provide this service.  If you hold the property for 1 year, or more, then your capital gains will be considered "long-term."  This year, those brackets are still 0% and 15%, depending on income, but those amounts are currently set to increase next year.  Your short-term capital gains rate will be calculated as if your earnings are "ordinary income."  In other words, just like other earned income. 

Just keep track of ALL your expenses and you can likely demonstrate a lower profit than you're anticipating and reduce your taxable gains this year.  There are other ways to protect your earnings, but I'm going to assume if you're asking this question now, those scenarios aren't applicable.