| Selling my home as a retirement plan? |
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londonlad
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Cash: $ 2.55
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| Selling my home as a retirement plan? |
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Am I thinking correctly?
I'm a boomer, about 3.5 years from a realistic retirement date. I am aiming to replace 80% of my GROSS income in retirement. I have $500k of capital gain in my home of 21 years.
Notwithstanding the obvious benefits of downsizing - even if I were to sell and buy a house of identical price - that there would be ABSOLUTELY NO TAXES (income or CG) APPLICABLE to the $500k of Capital gain inthe house?
If that is the case, it would mean that (as long as I sell my house and buy another) the first period of retirement - until $500k of withdrawals were exceeded - I would be living entirely tax free and that my early years withdrawal rate can be substantially lower than I had previously thought?
I might be stating the obvious but I've only just figured-out that angle and I'm hoping that other Forum Members can tell me if my thinking is correct or what I've overlooked.
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Sat Apr 01, 2006 5:00 pm |
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coaster
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If you're married, $500K of capital gain in your house isn't taxed (under current tax law.) So if you want to downsize into a smaller house I think that now is the time to do it. I don't know how long that cap gain exclusion will be permitted. Tax law might change next year. It's my assumption, too, that you can live off that as long as it lasts tax free. Although I also assume you'd at least be earning interest off the balance and that, of course, would be taxed.
So, the way I understand your scenario is the same as you present it. But I'm not a tax adviser and so if you want to make sure there aren't any unexpected repercusions, you might want to consult a tax person or financial adviser.
~Tim~
Eye Candy : Why Whimsy
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Sat Apr 01, 2006 5:14 pm |
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coaster
Senior Advisor
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quote:
Originally posted by muneepenee
3. If yu sell a hous, yu mae hav capital gaen. If yu hav gaen, yu mae hafta pae inkum tax onit. Thats for the yeer yu sell. Next yeer is next yeer.
Get off your a## and get up to date on tax law.
Note to forum members: you're not really going to take advice from someone who can't spell, are you?
~Tim~
Eye Candy : Why Whimsy
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Sat Apr 01, 2006 9:52 pm |
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londonlad
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Cash: $ 2.55
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Coaster
Thanks for the advice.
Clearly Muneepenee didn't understand the question and I certainly couldn't understand his language let alone the content of his response! I'm sure he has fun in his world.
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Sat Apr 01, 2006 11:17 pm |
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JBendar
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| Re: Selling my home as a retirement plan? |
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quote:
Originally posted by londonlad
Am I thinking correctly?
I'm a boomer, about 3.5 years from a realistic retirement date. I am aiming to replace 80% of my GROSS income in retirement. I have $500k of capital gain in my home of 21 years.
Notwithstanding the obvious benefits of downsizing - even if I were to sell and buy a house of identical price - that there would be ABSOLUTELY NO TAXES (income or CG) APPLICABLE to the $500k of Capital gain inthe house?
If that is the case, it would mean that (as long as I sell my house and buy another) the first period of retirement - until $500k of withdrawals were exceeded - I would be living entirely tax free and that my early years withdrawal rate can be substantially lower than I had previously thought?
I might be stating the obvious but I've only just figured-out that angle and I'm hoping that other Forum Members can tell me if my thinking is correct or what I've overlooked.
Listed below is the web address that relates to the sale of a home (IRS):
http://www.irs.gov/pub/irs-pdf/p523.pdf
There are all sorts of exceptions and fine points, but the $500k is mentioned in the publication. Before thinking that there will be no income taxes to pay, look into the exceptions and exclusions. This publication is not the only source either. Most likely there will be references to other publications to clarify points.
JBendar 
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Sun Apr 02, 2006 5:09 am |
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more freedom
Full Member
Cash: $ 16.20
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Why not learn how to invest in real estate?
You can refinance your equity and invest for positive cash flow deals.
I can recommend you some good real estaet books if you want.
Just let me know and I will name you some great books
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Mon Jul 17, 2006 1:22 am |
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DFTR
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Location: Indiana
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I don't see the purpose of selling your house just to sell it. It is true that you have 500K of tax free capital gain (if you are MFJ). You are going to spend a good portion of that money on a new house, or on rent.
You will always need a place to live. At heart, a house is not really an investment. It is where you lay your head.
For your retirement living, you have: your retirement plans, your regular savings, social security (unless you are young), and your pension (if you work for a strong company). These are your true retirement income sources. Only sell your house if there is a personal reason to sell.
Annuities, Insurance, International Trade.
Lets learn together, and help one another.
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Mon Jul 17, 2006 7:05 pm |
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SomeBum
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If you can find a nice place to move to and sock away a few hundred thousand into income producing investments you'll do better than if you stay and leave all that capital invested in your house.
TSX-Venture Investing on Nabloid.com
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Tue Aug 01, 2006 9:09 pm |
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BlankenshipFP
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The one stipulation on the exclusion of gain from the sale of a home that hasn't been mentioned here yet is that you must live in the house for two of the previous five years. In the case of the OP, this isn't an issue, but it may be for others.
In addition, the $500k number that's been bandied about is for a married couple who both meet the "2 out of 5" rule. If single or one spouse doesn't meet the residential requirement, then the figure is $250k (for the most part).
Hope this helps -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Wed Aug 02, 2006 2:53 pm |
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