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Questions about capital gains on real estate

Personal Finance & Money Asked on July 18, 2021

Let’s say I sold my house in California and I estimate the amount that capital gains will be taxed (basis + costs + exemption of 250,000/500,000 if it was your primary residence) and there’s an amount leftover. Then I plan on moving to Arizona within a few months afterwards. Would I be taxed CA’s rate or AZ’s rate on the amount leftover? Also, is there a way to avoid capital gains altogether?

I researched that it’s based off your income bracket but what happens if you never done taxes before (aka jobless or never received income to report)?

Edit: The house was gifted. I guess another follow-up question. Would the basis be higher than the sale price it was brought, same or be counted as $0? (House was brought sometime 2012 and gifted 4 years later 2016)

Thanks

One Answer

Then I plan on moving to Arizona within a few months afterwards. Would I be taxed CA's rate or AZ's rate on the amount leftover?

The house is in California. If there are capital gains taxes at the state level California will want their money.

Also, is there a way to avoid capital gains altogether?

You could convert the property into a rental. That will delay having to pay capital gains. Of course that brings in a host of other complications, plus the headache of managing a rental property in another state.

The house was gifted. I guess another follow-up question. Would the basis be higher than the sale price it was brought, same or be counted as $0? (House was brought sometime 2012 and gifted 4 years later 2016)

The basis on a gift is based on the original purchase price of the property. If the property had been inherited the basis would have be stepped up to the value at the time of the inheritance.

I am assuming that you lived in this house to be able to take the 250K/500K exemption, and that it never was a rental property.

Answered by mhoran_psprep on July 18, 2021

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