2W // Real Estate & Home Builders Guide // October 2016
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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
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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.
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