4M // Real Estate & Home Builders Guide // February 2017
Tax implications of selling land associated with main home
By Ilyce Glink
and Samuel J. Tamkin
Tribune Content Agency
to determine the value of the home and
the value of the land when you purchased
both together. Then, you’ll have to use that
amount to determine the value of the land
you sold. When you compare the values,
you’ll see if you have a profit or not.
If you compute the difference and come
up with a profit, you may have to pay tax
on that amount. Usually when you sell
your primary residence and you’ve lived
in it for two out of the last five years, you
wouldn’t have to pay taxes on the profit
from that sale. (Up to $250,000 in profits
can be excluded if you’re single, and up to
$500,000 in profits if you’re married).
Keep in mind that any expenses
relating to the sale of the land would
reduce the amount of federal income
taxes you’ll end up paying. And, you
should also know that your tax rate on the
sale of the land can be no more than 20
percent (which is the current tax rate for
long-term capital gains). Depending on
your income, you could pay less than the
20 percent rate.
Finally, our answer could potentially
change if you sell the rest of the property
(including the house itself) in the same
calendar year. Since you are moving
Q
: My husband and I put our house and
attached land on the market in 2016.
We had to relocate because of job changes.
The house is still on the market. We
were able to sell part of the attached
land for $65,000 and put $60,000 of that
against the existing mortgage of $213,000.
We spent the remaining $5,000 on
expenses, some of which were related to
the sale of the home.
We’re wondering if we’ll have to
pay capital gains tax on the $65,000 we
received when we sold the land.
: You pose an interesting question.
We can’t tell from your question
whether you’d have any federal income
taxes to pay on the sale of the land. If you
purchased the entire property for a certain
price and you sold the land for a price
where you either made no money or even
lost money, we suspect you’d have no tax
to pay.
The real question is whether you have a
profit on the sale of the land. It seems that
this house and land were all used by you
as your primary residence. You will have
A
— and have to move — due to a job
change, if you are able to sell your home
during the same year, you might be able
to lump together both sales and consider
them as one. If you can consider them as
one, you might get to exclude any federal
income taxes from both sales.
Please don’t consider that a final
answer, since there may be other issues
to consider based on your particular
situation that could profoundly impact
your tax return. Please consult with a tax
C O U N TRY
P R EFER R ED ,
R EA LTO R S
advisor, enrolled agent or accountant for
more information.
(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.)
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