My pops is about to sell his house in the valley. He's only making about a $4000.00 dollar profit on it, and hes had it for over 15 yrs. Along with the closing papers he has to overnight, there is a W-9 he has to fill out. Does he have to pay taxes on the entire amount? Hes practically losing money on it, and he's starting to wonder if he should even sell it or not. The contract he signed, the closing date was June 29th. They just now got the buyer approved, and they want him to sign and overnight the paperwork, and hes upset about that. Can he just back out of the contract? Thanks for your help in advance!
As long as it was his primary residence, he shouldn't have to pay any taxes on the profits. He can't get out of the contract, but he can just not sign the papers and see what happens. My guess is he would be subject to a breach of contract suit.
He bought the house 15 yrs ago for $32,000.00. He sold it for $42,000.000, after covering closing costs, and paying the commission to the sales person, hes only going to clear 36,000.00.
IIRC this works up to a $500,000 limit (per couple?). Pops had to be living there mostly full time (18 out of the last 24 months?). BTW capital improvements can be applied to the basis. For example, install a lawn sprinkler system and that bumps the basis.
property sucks in browsville, the only reason he even purchased a home there, was for my grandmother.
I believe you are right on all that. I do know that as long as a house has been your primary residence for 2 years, then the capital gains limits is very high to the point that the average homeowner will never reach it. Thats what alot of flippers do. They'll buy a POS foreclosure, fix it up and live in it for 2 years then sell it so they avoid taxes on their profit.
