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Q: I want to downsize and buy a smaller home in my neighborhood. My mom passed away and left me the home a few years ago. I think it will sell for about $1 million. Is there anything I should know about with regard to owing any tax on the sale of my current home? If I buy a home of equal or greater value, will that let me roll over my profit?
- L. Peters, Costa Mesa
A: With the 1997 Tax Relief Act there is no longer a rollover rule that applies even if you are over 55. You are allowed a $250,000 tax exemption ($500,000 if you are married) on the sale of a primary residence. This exemption can be used once every two years. You have what is called a "stepped up" basis on the value of your home since the date of your mother´s death.
To use an example: if your mom´s home was worth $700,000 at the time of her death, you can effectively sell the home for $950,000 without paying any income tax. ($700,000 +$250,000) The cost of improvements and closing costs are also added in to increase your "basis" and the amount you can sell for without paying any tax. This is a very simplified generalization.
For a complete answer to your specific case please consult with your tax adviser.
Valerie Torelli is owner of Torelli Realty
in Costa Mesa. Direct your questionsto
asktherealtor@torellirealty.com or call
714-540-7355 |
