Prior to 1997 and the Taxpayer Relief Act, only persons over the age of 55 could take advantage of capital gains tax exemption from the sale of their homes, but now age is irrelevant and anyone can participate. That’s right: anyone. People in their twenties without children can now claim exemptions.
There is no longer a rule that states the money must be rolled over into another home purchase within two years of selling the previous one. This was called the “rollover rule,” but it too was laid to rest in ‘97. Now you may do whatever you wish with your money and still may claim the exemption.
The only factor involving time indicates a minimum of five years of ownership, not occupancy. The owner must have occupied the unit for at least two years out of that five. There are many misconceptions about this rule, with some assuming that the owner must live in the unit at the time of sale – but there can even be a tenant in the house at the time of listing and no rules will have been broken. There are, however, some other things to keep in mind:
You can only claim exemption on one residence at a time. The house must be identified as your primary residence, even if you aren’t living in it at the time of sale, as mentioned above. This means you can’t purchase a new house, lease out your old residence for a few years, and then sell both of them at the same time, claiming the exemption on both. You can, however, claim the exemption on your old house while living in your new one, then proceeding to live another 2 years in the new house in order to begin meeting all the minimum necessary criteria for another exemption. Fun, isn’t it?
When it comes to preparing your house for sale, any cash that you put into it such as new paint, drapes, cleaning, etc., cannot be deducted from the sales price. Significant investments in the capital improvement of your home, however - anything that adds permanent value - can be deducted. Examples of this might be the addition of a garage or a second story. This can be a slap in the face to people who have put several thousand into prepping their residences for the market, expecting to have it returned to them in the form of a tax deduction.
With the passage of Obama’s Affordable Care Act, a new tax has been placed on the sale of all real estate: a 3.8% Medicare tax will be placed on the investment/unearned income of all high income taxpayers. High income taxpayers are individuals reporting more than $200,000 annual income or married couples filing jointly reporting more than $250,000. The interesting part here is that the $250,000 capital gains exclusion applies with regard to the Medicare tax no matter what your income level is. If your income is below the threshold, the Medicare tax won’t enter into the equation. If your income is above the threshold but your capital gain is below the exclusion, the Medicare tax is also out. If your income is above the threshold and your capital gain from the sale of your home is above the exclusion, the Medicare tax will be imposed but only on the portion of the gain that exceeds the exclusion amount.
With a housing market like that of inner Houston, with high property value and a perpetually low inventory of listings, there is almost never a time when properties in this part of the city aren’t incrementally increasing in one manner or another. In the inner loop area of Houston, or around Tanglewood, Hunter’s Creek, Piney Point or Bunker Hill Village, owners can easily wake up one morning and discover that their properties have appreciated well beyond the $250,000 threshold. As one can see, there are a number of ways to take control of the situation long before this ever happens if one wishes. Call an Allen Brothers Realtors agent today to talk about your options.
East End To Get Luxury Townhome Project
An area east of Downtown will soon have 73 townhomes planned by
a Houston-based builder that will be on two blocks of land just south of
Buffalo Bayou on Kennedy Street. The property is owned by Padua Realty, and it
is a few blocks north of a festive section of Navigation Boulevard where the
original Ninfa's and a new Tiempo Cantina are located.
It isn't far from Guadalupe Park, and there are plenty of hiking
and biking trails along the bayou. Padua Realty will be the land developers,
selling the individual lots to Perry Homes. According to Tony Padua, his
firm has established a plan with the local tax increment reinvestment zone to
assist with much needed upgrades to the surrounding area. In this
deal, Padua's company can pay the first upgrade costs and then receive compensation
when taxes go up as a consequence of the improvements.
Padua says that this will truly empower them to upgrade all the
roads and other utilities needed to have such a caliber of construction in the
area. Several other similar high end projects are also in the works in the
vicinity, say many people who know about the area. The area is just north of an
already-thriving district directly to the east of Downtown Houston often called
by the nickname ‘EaDo.’
lot of people have their attention fixed on what will happen with a 136-acre
piece of land to the north of Buffalo Bayou purchased over a year ago by William
Harrison of Cathexis. The company has not revealed any plans for the site;
Cathexis has many interests in oil and gas. The more settled single-family
neighborhood just south and east of this section of town has been bringing in
younger home buyers who seek the proximity of downtown and all the ease it affords
them, along with many proposed future rail projects in the area, but the
Heights and Montrose are out of their budget. Top agents note that bungalows in
this area look very similar to the ones that were in West University 30 years
ago and the Heights 20 years ago. An agent said a renovated house in the area even
sold for 98% of its asking price.
Homes should begin construction on the townhomes on Houston’s east side during
the first quarter of 2015. They will be three and four stories tall. They will
be between 1,700 and 2.400 square feet and most will have three bedrooms. Mainly
the company builds in the suburbs, but has also done projects in Midtown and
other central areas. Several years back it did a project east of downtown on
Runnels near South Jensen. The company asserts that the work it is doing in the
East End to modernize the area is part of a publicized attempt to make the area
more friendly to pedestrians and mixed use in general. It has not come to a
market price for the units as of this time.
says the construction company plans to build the townhomes with top quality design
standards with back-loaded garages and surfaces built only with stone, stucco
or brick. They will all be regulated by their architectural designs to a
consistent degree of quality. He sees enormous development possibilities in the
area, which he calls the Bayou District. The new project is referred to as East
End on the Bayou.
points out that the bayou area to the north with three miles of hiking and
biking trails is an especially wide part of the bayou, and quite similar to a
jungle in its current state, with many native species, including birds and
Texas Housing Prices Opposite From National Curve
The Texas housing market has done nothing but exceed
expectations in 2014. In Dallas, September home prices rose 7.4% compared to
the same period last year and 0.3% from the previous month, according to the
latest S&P Case-Shiller Home Price Indices.
For some reason S&P does not keep record of Houston home
prices, but Dallas numbers are very similar to its rival coastal city to the
south. Dallas and Texas home prices are very different from the rest of the
country, where the price of homes slowed down almost everywhere else as fall
arrived. Elsewhere only Charlotte, NC saw an increase in home prices.
The Houston market has performed in a manner opposite to
that of the rest of the country, which is typical. In the rest of the nation,
the 10- and 20-City Composites are up 4.8 and 4.9 percent compared to the same
period last year respectively, which is down from August, in which the yearly
gains were 5.5 and 5.6 percent respectively. This is the smallest annual
increase in a couple of years. Also, the National Case-Shiller Index went down
0.1% from August to September, which was the first monthly decrease for the
index since November 2013. Eighteen of the 20 cities tracked by Standard and
Poor’s had slower annual housing increases from August to September. 2014 housing prices as of September are
averaging 5% below what they were in September 2013, but still well above what
they were in 2010 and 2011, according to the Wall Street Journal.
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