NO capital gains on real estate sales in 2008

mom-from-missouri · #1 (**permalink**) 01-08-2008, 10:18 AM

DD1 just called. She is a math major (getting 2 different math degrees), and taking a tax class. Her instructor told them that homes that sell in 2008 will not be subject to capital gains tax. However, the rate will be going up in 2009. The instructors bottom line, if you are planning on selling real estate, this is the year to do it in.

feh · #2 (**permalink**) 01-08-2008, 10:33 AM

I don't know if the above is true or not, but the profits for almost all home sales are tax free anyway.

As long as you've lived in the house for 2+ years and your profits are less than $250K, there isn't any tax.

mom-from-missouri · #3 (**permalink**) 01-08-2008, 10:50 AM

I just know she told me if I wanted to get rid of any of my rentals, this was the year. I don't live in my rentals, so that may be thing-you don't have to live in it this year?? The teacher just briefly brought it up. She is going to get more info for me.

sweeps · #4 (**permalink**) 01-08-2008, 11:24 AM

Right, the special exemption that feh is talking about typically doesn't apply to rentals or investment real estate.

The instructor is only half right about the capital gains. Only those people in the 10% and 15% tax brackets are eligible for the zero capital gains tax. Everyone else pays 15%.

MoneyBags08 · #5 (**permalink**) 01-17-2008, 08:53 PM

Why would the government decide to do this?

filifefc · #6 (**permalink**) 01-18-2008, 06:46 AM

does anyone know more about this? I would be interested in hearing why there is such a policy.

tripods68 · #7 (**permalink**) 01-18-2008, 11:53 AM

Quote:

Originally Posted by sweeps

Right, the special exemption that feh is talking about typically doesn't apply to rentals or investment real estate.

The instructor is only half right about the capital gains. Only those people in the 10% and 15% tax brackets are eligible for the zero capital gains tax. Everyone else pays 15%.

Can you clarify what you mean about zero capital gain tax? Are you referring to owners who have rental property tax?

Unless you referring to federal capital gain exemptions for selling your primary home (assuming they live 2 years out 5 years of owning the house) for married couple $500K and $250K for single. I think this still true last time I check.

sweeps · #8 (**permalink**) 01-18-2008, 01:57 PM

Quote:

Originally Posted by tripods68

Can you clarify what you mean about zero capital gain tax? Are you referring to owners who have rental property tax?

Unless you referring to federal capital gain exemptions for selling your primary home (assuming they live 2 years out 5 years of owning the house) for married couple $500K and $250K for single. I think this still true last time I check.

No, I'm talking about when the owner of the house sells his house. You have to pay capital gains tax on the profit from selling a house that is not eligible for the $250K/$500K exclusion. If you are in a bracket that has 0% capital gains tax, then you pay no tax on the profit from selling the house.

tripods68 · #9 (**permalink**) 01-18-2008, 03:23 PM

Quote:

Originally Posted by sweeps

No, I'm talking about when the owner of the house sells his house. You have to pay capital gains tax on the profit from selling a house that is not eligible for the $250K/$500K exclusion. If you are in a bracket that has 0% capital gains tax, then you pay no tax on the profit from selling the house.

Thank you for clarifying that for me.

mom-from-missouri · #10 (**permalink**) 01-18-2008, 05:55 PM

DD said the instructor brought it up again in class yesterday, and now added that the capital gains tax will be higher next year, and the income brackets may change as well....

The same instructor told the students last semester in Tax 1 (name of the class-now its Tax 2), that Bush would be giving an $800 or $1600 rebate this year. When DD told people she was told this in class last fall, people told her she heard wrong or was nuts. Now announcements about this have been made public.

So this maybe something that they are still working on that has not been announced yet?? The instructor also works for the IRS. This is a night class the instructor teaches. DD is a 4.0 student graduating at the end of the semester with 2 math degrees and 1 minor. So, she isn't the sort to just hear stuff half way and get it wrong.

MonkeyMama · #11 (**permalink**) 01-19-2008, 05:22 PM

It is true but the problem is that you have to be in the 10% or 15% tax bracket. which you most likely will not be if you sell a piece of real estate.

This is only really useful if you have a very tiny gain on a piece of real estate (and a lower income). Because any larger gain will push you to a higher tax bracket. (The catch 22). It is true with a lot of "buts" that exclude most people. I can't imagine telling people they could sell real estate and pay no gains, because the odds would be slim anyone would fall into this.

This is more useful for having your minor children selling things in their investment portfolio. (Though new kiddie tax rules eliminate much of this benefit too).

Here's a good article on the details:

2008 drop in capital gains rate won't be for everyone - USATODAY.com