It’s tax time and you may have questions if you own a second home and sold it or plan to sell it. Do you have to pay capital gains when you sell a second home? All that depends.
A second home, says HRBlock.com, can include houses, mobile homes, condos, co-ops, trailers, and houseboats. When you sell a second home, Merrilledge.com says you’ll owe capital gains on any profits, with certain exclusions.
If you purchased your home as your primary residence, and it was your primary residence for at least two of the five years immediately preceding the sale, you can exclude up to $500,000 of gains on the sale if you’re married and filing jointly, or exclude $250,000 for singles. You can also deduct real estate taxes and points paid to buy your second home.
If you own your second home for more than one year, it’s a long-term capital gain on the profit; a short-term capital gain is on a profit of a second home you owned one year or less.
If you got a mortgage to buy or improve a second home, you can deduct the mortgage interest if you itemize deductions. So it’s important that you keep good records of your expenses.
Your deduction could be limited if your mortgage is more than the fair market value of your home or if the combined mortgages on your primary home and second home are more than $500,000 for single filers or $1million for married joint filers.
Most importantly, confirm all information with your tax attorney, CPA or tax professional.