Capital Gains Tax -- How Big a Factor?

I just got a relatively good deal on a house and would like to do a few
upgrades and sell it soon. How big of a factor is capital gains tax? I've
read that if you sell after you've owned the house for more than two years,
you don't have to pay the tax. Is that correct, and how much is the capital
gains tax rate? There is a lot of buying and selling going on now, so
apparently some investors are able to get a good return even with the tax.
I'm not an experienced real estate investor, so your advice or links would
be appreciated. Should I wait two years to sell? I'm in the St. Louis
area, if location matters.

Thanks in advance,
Muffin

Re: Capital Gains Tax -- How Big a Factor?

Muffin wrote:
> How big of a factor is capital gains tax? I've
> read that if you sell after you've owned the house for more than two years,
> you don't have to pay the tax.

You have to *live* in the house as primary residence for more than two
years, not just own it.

I'm not an expert, but I think that if you own less than 1 year, then
it is taxed as regular income (25% to 35%). If you own more than 1
year, then it is taxed at long-term capital gains (15%). If you *live*
as primary residence for over 2 years, then no capital gains tax.

> Should I wait two years to sell?

Heck no. Real estate prices could fall dramatically in 2 years. It's
better to make $20K and pay $6K in taxes now than risk a loss in 2
years.

Re: Capital Gains Tax -- How Big a Factor?

If you have owned and *lived* in your principal residence an "aggregate" two
of the five years before its sale, you qualify for up to $250,000 tax-free
profits. If you're married and your spouse also lived in the principal
residence an "aggregate" two of the five years before its sale, and if you
file a joint tax return for the year of the home sale, you can qualify for
up to $500,000 of total tax-free home-sale profits.

"Muffin" <> wrote in message
news:xONLe.904$Z%
>I just got a relatively good deal on a house and would like to do a few
>upgrades and sell it soon. How big of a factor is capital gains tax? I've
>read that if you sell after you've owned the house for more than two years,
>you don't have to pay the tax. Is that correct, and how much is the
>capital gains tax rate? There is a lot of buying and selling going on
>now, so apparently some investors are able to get a good return even with
>the tax. I'm not an experienced real estate investor, so your advice or
>links would be appreciated. Should I wait two years to sell? I'm in the
>St. Louis area, if location matters.
>
> Thanks in advance,
> Muffin

Re: Capital Gains Tax -- How Big a Factor?

"Grover C. McCoury III" <> wrote in message
news:

> If you have owned and *lived* in your principal residence an "aggregate"
two
> of the five years before its sale, you qualify for up to $250,000 tax-free
> profits. If you're married and your spouse also lived in the principal
> residence an "aggregate" two of the five years before its sale, and if you
> file a joint tax return for the year of the home sale, you can qualify for
> up to $500,000 of total tax-free home-sale profits.

"Tax-free"? Really?

Re: Capital Gains Tax -- How Big a Factor?

>
>> Should I wait two years to sell?
>
> Heck no. Real estate prices could fall dramatically in 2 years. It's
> better to make $20K and pay $6K in taxes now than risk a loss in 2
> years.
>

Thanks. Maybe you can help with another question. If I only have 5% for a
down payment, is it worth it to get a two mortgage 80-15-5 deal to avoid
PMI. The rate of the second mortgage is 7.4%, which is high. Do I really
save? How much is PMI?

Muffin