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2W // Real Estate & Home Builders Guide // October 2016 WEST ZONE TABLE OF CONTENTS Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18W RMLS Umatilla Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10W Morrow County: EO Media Group • 211 SE Byers • Pendleton, OR 97801 : What if you build a house but never rent it or live in it and then sell it? How is the gain taxed? : The important information is whether you lived in the home or not. Since you never lived in the home, you wouldn't get any IRS beneits as a homeowner selling his home. Those beneits are substantial. If you live in a home for two out of the last ive years, you can exclude $250,000 in proits (or, if you are married, $500,000 in proits) from any federal income taxes. But this federal tax beneit would not apply to your situation. Let's assume your question arises from a situation in which you purchased land, built a home, were planning to live in it but never did and now you sell it for a substantial proit. Let's say it's $100,000 proit. What happens from a tax perspective? We're sure we'll get letters from tax practitioners on this one, but to keep it simple we're also going to assume that you've owned the property for at least a year and also completed the home at least a year ago. Having assumed all that, you could be said to own an asset that you've had for more than one year and when you sell it, you'd pay capital gains taxes on the proit you make from the sale. So, if this $100,000 proit might require you to pay about $24,000 in taxes to the IRS (the amount will depend on other deductions or credits you may have). On the other hand, if the building of the home was part of a business to build and sell homes, the home might be considered more like the inventory of your business and in this instance, you would not get the beneits of capital gains rates on the sale of the home. If this was the case, we'd assume you'd pay around $35,000 in taxes to the IRS. (Remember, we're trying to keep it simple and give you a broad overview of the To Advertise in the Eastern Oregon Real Estate & Homebuilders Guide Contact 541-278-2670 • 1-800-987-7511 • realestate@eastoregonian.com Q A picture; not drill down to the details or give you precise numbers.) In some ways, your question is a trick question because it does not give the whole picture or provide enough information to make a reasonable guess. Simply put, if you sell a primary resi- dence that you've live in for at least two out of the last ive years, you probably wouldn't have to pay any tax on the sale, as long as your proit is below $250,000 if you're single and $500,000 if you're married. If you are in the business of building homes for sale to other people, you'll have the greatest amount to pay in federal income taxes. And, then there is the middle ground where a variety of factors could lead to variable outcomes. For those complicated scenarios, call your accountant or tax preparers. But the devil is in the details: You might be better off (from a tax perspective) if you rent the home for a couple of years and then sell it. Even better, if you like the home you built and can sell your current residence, you might consider doing just that and moving into your new home. If tax laws stay the same, any proit on the home you just sold would probably not get taxed (if they are less than $250,000) and if you live in this home for two years, you can sell it then and keep all the proits without paying tax (again, if the proits are less than $250,000). There are some exclusions and limitations to the IRS home sale rules. You can get more information at www.IRS.gov. (Ilyce Glink is the creator of an 18-part webinar+ebook series called “The Intentional Investor: How to be wildly successful in real estate,” as well as the author of many books on real estate. She also hosts the “Real Estate Minute,” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.) & H om ebu ilders G u ide Jeanne Jewett • Amanda Jacobs • Audra Workman • Dayle Stinson Stephanie Newsom • Chris McClellan • Terri Briggs By Ilyce Glink and Samuel J. Tamkin Tribune Content Agency R e al E state Advertising Sales Tax on capital gains varies when building a house to sell Eastern Oregon Mt. Valley Land Co . . . . . . . . . . . . . . . . . . . 06W, 23W American West Properties . . . . . . . . 19W, 20W Umatilla County: American West Properties, Hermiston . . . . . . . . . . . . . . . . . . 11W-15W Fordice Real Estate Services. Inc . . . . . . . 10W Hermiston Realty . . . . 03W, 16W-17W, 24W Preferred Realty, Inc . . . . . . . . . . . . . . . . . 03W, 09W RE/MAX Cornerstone . . . . . . 04W-05W, 10W Universal Realty . . . . . . . . . . . . . . 20W,22W - 23W Miller Realty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08W,20W C Holt Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23W Affiliates: Home Town Mortgage Group . . . . . . . . . . . 01W RMLS-Regional Multiple Listing Service . . . . . . . . . . . . . . . . . . . . . . 07W Banner Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 03W W E M W= WEST: Umatilla, Morrow, Gilliam & Wheeler Counties E = EAST: Umatilla, Morrow, Gilliam & Wheeler Counties M = MOUNTAIN: Union, Wallowa, Baker, Grant, Malheur & Harney Counties October 2016, Volume 31, Number 10 Eastern Oregon Real Estate & Home Builders Guide is published monthly by the East Oregonian Publishing Company, 211 SE Byers, Pendleton, Oregon 97801. Subscription rates are $16 for 12 issues. Third-class postage paid at Pendleton, Oregon. For subscription service questions, call (541 ) 278-2670 or 1-800- 987-7511 or write Eastern Oregon Real Estate & Home Builders Guide, 211 SE Byers, Pendleton, Oregon 97801. All real estate advertising in this paper is subject to the Federal Fair Housing Act of 1968 which makes it i llegal to advertise “any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial sta tus or national origin, or an intention to make any such preference, limitation or discrimination.” This paper will not knowing ly accept any advertising for real estate which is in violation of the law. Our readers are hereby informed that a ll dwellings advertised in this paper are available on an equal opportunity basis. The information in this paper is deemed to b e correct but not guaranteed. All properties or information contained in this paper are subject to prior change, modif ication, sale, or withdrawal from the market. Copyright© 2016 EO Media Group. All rights reserved. www.eastoregonrealestate.com
