Tax implications of selling a sticks & bricks and moving into an RV?

[Dahai]

Hello. In June 2018 I sold my sticks & bricks house and began full-timing in a motorhome which I purchased in 2017. I had owned the house for 21 years and was fortunate to sell it at a substantial profit. In February 2019 I bought a lot in an RV resort where I plan to spend the winters in the motorhome. I own no other home or real estate.

On the 2017 tax return I deducted the sales tax on the motorhome and the interest that I paid on the loan. I'll again deduct the loan interest on the 2018 return.

My questions concern the capital gains on the house. I remember reading somewhere a while ago that if we move into an RV full time we may deduct the sales price of the RV to reduce the capital gains tax on the sale of the house. Is that correct? If so, in my case on the 2018 return, does it matter that I bought the motorhome in 2017? And what about the resort lot that I bought last month in 2019? May I claim both?

What have you full-timers experienced in this regard after selling your sticks & bricks homes? Thanks for any guidance you folks can give me.

[drdarrin]

I’m no tax expert so my advice is only worth what you’re paying for it.

On the sale of a principal residence, if you have lived in it 2 of the preceding 5 years, I believe you are exempt from capital gains up to a set amount if you are single and double that amount if married. What those amounts are can be found googling the internet.

Regarding your second question, hopefully someone else can answer it but I would double check any answer with a cpa or tax advisor.

[twogypsies]

I think you need to contact a tax expert and not rely on others' suggestions. This could be serious for you in the future if not done correctly.

[arcaguy]

Per Title 26 Section 121 of the United State Code,(The Internal Revenue Code)


(a) Exclusion
Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.

(b) Limitations
(1) In general The amount of gain excluded from gross income under subsection (a) with respect to any sale or exchange shall not exceed $250,000.


(2) Special rules for joint returns
In the case of a husband and wife who make a joint return for the taxable year of the sale or exchange of the property— (A) $500,000 Limitation for certain joint returnsParagraph (1) shall be applied by substituting “$500,000” for “$250,000” if— (i) either spouse meets the ownership requirements of subsection (a) with respect to such property;

(ii) both spouses meet the use requirements of subsection (a) with respect to such property; and

(iii) neither spouse is ineligible for the benefits of subsection (a) with respect to such property by reason of paragraph (3).


Here's the link:https://www.law.cornell.edu/uscode/text/26/121



You might also go to the www.irs.gov and get a copy of Publication 523.


But in general the previous poster was correct if you really lived in the house for 21 years you're probably in the clear unless you made more that $250,000 on the sale. As to the other stuff about the lot and the RV, it is inconsequential if the gain is not taxable.

[BillJinOR]

250000 exempt, 1/2 mil if your filing jointly if you made more than that you should have a tax pro look it over must be primary for 2 years min
Just sold my house a couple years ago .. tax free event !

[Mr_D]

Really hate that exemption rule as it's going to cost me. We bought the house 32 years ago, worth far North of what we paid, but my wife died in 2016 so there went half of the 500,000 exemption through no action of mine. Same with standard deduction.

[Dahai]

Thanks everyone for your responses. Didn't want to make my post too lengthy, but I should've mentioned I was aware of the $250,000 exemption, but even after adding on the improvements I made to the house, the costs to stage and sell it--which are numerous--and some other deductions, I still owe a huge tax bill. This was in the red hot Los Angeles market that has been on fire for a long time. Was lucky to have two couples try to outbid each other for it.


I was thinking if you buy another property after selling a house you can deduct the new house from your profits to reduce the amount of taxes owed. Was wondering if the motorhome counted as a new "house" and you have to buy it within a specific time frame.

[drdarrin]

I think you are out of luck deducting the cost of your new home. But hey, if you exceeded the 250,000/500,000 limit, you did darn good on your sale. Enjoy your good fortune!

[arcaguy]

Really, get publication 523 at www.irs.gov it will likely cover your scenario. Their publications are generally very good and don't tilt toward the government. That said, with the kind of dollars you're talking about a grand or so for some professional advice is probably money well spent. I really am a CPA but I don't play one on TV. And for added benefit Publication 523, is a great cure for insomnia.


Mr D you need to get publication 523 also if you sold your house within 2 years of your wife's death then you get to keep the $500,000 exemption.

[arcaguy]

I also think that you're out of luck on the purchase of the RV and Lot as the rollover rule is likely what you were thinking about and according to this article it disappeared in the 1997 tax act.


New Home Sale Rules


Good luck, but I'm afraid you're out of luck.

[TXTiger]

I am not a CPA but I am a lawyer but not a tax lawyer. The rollover is past history and was replaced by the exemption rule. If the property sold is your principle residence and you lived in the subject property for 2 out of the last 5 years you may claim an exemption of up to $250,000 or $500,000 on a joint return. Any amount of gain exceeding those amounts are subject to capital gains tax. Your gain is the difference of your basis and your sale price less the cost of sale. Your basis is what you paid and any costs added for improvements which is called an adjusted basis. One post stated that the wife had died. On that event you would get a step up in basis for the deceased spouses share of the residence. Although this forum is helpful you really do need to talk to a tax professional such as a CPA, EA or Tax Lawyer. The purchase of a RV or RV lot is irrelevant to the tax owed on the sale of your residence, however if you itemize you can deduct any interest for loans on an RV or Lot, however with the doubling of the standard deduction most will not itemize in the future.

[Arch Hoagland]

I've bought and sold several homes in California and have done a couple 1031 exchanges with rental houses.

You really need to see a Tax consultant that is licensed in California.

[Dahai]

Originally Posted by drdarrin

I think you are out of luck deducting the cost of your new home. But hey, if you exceeded the 250,000/500,000 limit, you did darn good on your sale. Enjoy your good fortune!

Yeah, I consider myself quite fortunate, and I'm happy to pay my taxes on it. Just not too much tax!

[Dahai]

Originally Posted by arcaguy

....I really am a CPA but I don't play one on TV.....

But you did stay at a Holiday Inn Express last night, right?