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Author: rbansali Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127710  
Subject: Taking equity out Date: 10/29/2003 8:51 PM
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I wanted to know if this was true:

If I have a house that I bought for $40K
I 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
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Author: lowellches Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 60454 of 127710
Subject: Re: Taking equity out Date: 10/29/2003 9:00 PM
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Absolutly Untrue.

L

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Author: foobarista Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 60456 of 127710
Subject: Re: Taking equity out Date: 10/29/2003 9:08 PM
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No - your basis is the price you paid for the place. Your
gain here is $60K, assuming zero for things like RE agent
fees, 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 here
for at least two years before you sell, you pay no tax because
of the exemption of up to $250,000 on sale of your primary
residence ($500K for married filing jointly).

As always, see tax stuff and talk to someone who knows
your situation, etc, etc...

--Foobarista

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Author: JDOyster Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 60484 of 127710
Subject: Re: Taking equity out Date: 10/30/2003 2:55 PM
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If I have a house that I bought for $40K
I 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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