I wanted to know if this was true:If I have a house that I bought for $40KI take $40K out in an equity loan.I sell the house for 100K.Would I only be taxed on the $20K ($100K - $80K) remaining?rkb
No - your basis is the price you paid for the place. Yourgain here is $60K, assuming zero for things like RE agentfees, home improvements which increase your basis, etc.Whether you have a loan on the property or not is irrelevant.But if this is your primary residence, and you've lived herefor at least two years before you sell, you pay no tax becauseof the exemption of up to $250,000 on sale of your primaryresidence ($500K for married filing jointly).As always, see tax stuff and talk to someone who knows your situation, etc, etc...--Foobarista
If I have a house that I bought for $40KI take $40K out in an equity loan.I sell the house for 100K.Would I only be taxed on the $20K ($100K - $80K) remaining?No. Your capital gain is the net sale price minus the net purchase price. You can also subtract the cost of capital improvements (not repairs) from the capital gain. The mortgage balance has no impact on your capital gain.JDOyster
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