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Post by jerri on Nov 3, 2020 17:44:09 GMT -5
That's a big ouch. Even with the help.You were smart to get a tax deduction at least every other year. With her income you should get every year.
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Post by greatcoastal on Nov 3, 2020 18:28:00 GMT -5
Those are mind boggling numbers. I thought selling a house and buying another house, the profit from selling the old house didn't count as income. To me it isn't income, it is only inflation at work. She kept the house, and I was paid 1/2 of its appraised value. So I acquired that money, in one payment as income. The day I ever sell my real estate I expect a hefty tax on my acquired income. ( I'd rather will my properties to my children) |
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Post by Handy on Nov 3, 2020 18:58:39 GMT -5
OK, now I see the "income" situation. I still think it shouldn't be classified as income because house prices are mostly inflation and not really income, especially if you buy another house that is priced based on inflation.
I guess I flunked the IRS rules test.
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Post by mirrororchid on Nov 4, 2020 6:50:09 GMT -5
OK, now I see the "income" situation. I still think it shouldn't be classified as income because house prices are mostly inflation and not really income, especially if you buy another house that is priced based on inflation. I guess I flunked the IRS rules test. I wonder if they could have sold the house to his ex for its appraised value. As for kids and tax deductions, his ex saves more money and she should spend the money saved to help GreatCoastal finance life improvements for the kids. (after school fees, visits to grandparents, a computer upgrade, etc.) Really would be win-win except his ex seems to have disposed of the benevolence bond as well as the legal one with the divorce. Not a requirement, but looking after their spouse's well-being isn't a refuser's strength, much of the time. |
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Post by DryCreek on Nov 4, 2020 10:40:47 GMT -5
greatcoastal, for the level of money/tax you’re talking about, you really should do a check-in with a tax attorney. I’m sure there are nuances to your situation, but on the surface I can’t see how a division of jointly owned assets is taxable income to you, even if it’s structured as payments. But, certainly, your story underscores the importance of looking beyond the superficial numbers of the deal and evaluate the tax implications (e.g., tax-free vs tax-deferred vs after-tax accounts; home appreciation; 1031 deferrals, etc.). Not saying you didn’t, but rather that the swing can be significant.
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Post by Handy on Nov 4, 2020 11:23:33 GMT -5
www.irs.gov/businesses/small-businesses-self-employed/sale-of-residence-real-estate-tax-tipscopied from the IRS site If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
If you can exclude all of the gain, you do not need to report the sale on your tax return
If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040 or 1040-SR)I am not a tax person but this suggests there shouldn't be a tax on the money transferred to you Greatcostal. You were a part owner of the marital home so why tax money you already owned?
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Post by isthisit on Nov 4, 2020 11:43:26 GMT -5
Your tax system sounds horrifically complicated.
In the U.K. we have a Pay As You Earn system where the correct amount is deducted from your salary each month with an annual statement. They get it right for the majority of the time. I do nothing.
Everyone is viewed as an individual in terms of tax so layabout spouses are not tax deductible. Dependent children are not factored into tax matters at all. Capital gains on property is tax free as long as this relates to your main residence for a minimum of two years.
Reading this thread has suddenly made me appreciate HM Revenue & Customs. 😊
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Post by saarinista on Nov 4, 2020 12:54:55 GMT -5
See a lawyer or CPA. That's all there is to it.
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Post by DryCreek on Nov 4, 2020 19:21:41 GMT -5
isthisit, it sounds like the systems are not too different. We have the option of filing as a married couple instead of individually. In such cases, deductions and such are typically just doubled - so, it’s both a filing convenience and also benefits deductions where one spouse earns up to 2x while having a “layabout spouse”. We are also tax-free on primary home gains after 2 years, but with a limit of $250k per person. Handy, I inferred that in greatcoastal’s case the house wasn’t sold but she bought out his interest via giving him a larger share of the joint cash assets. Which isn’t income. The thing to realize with a CPA is that it’s both safe and easy for them to spend your money. It’s in their interest to be conservative and avoid audits. But it’s in your interest to be aggressive with deductions yet be prepared to defend your logic and pay the taxes if you’re audited and end up owing. If you’re debating the taxability of an extra $170K in income, the potential tax ($35k+) makes it worth paying for a second opinion before writing the IRS a big check.
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Post by isthisit on Nov 5, 2020 17:49:15 GMT -5
isthisit , it sounds like the systems are not too different. We have the option of filing as a married couple instead of individually. In such cases, deductions and such are typically just doubled - so, it’s both a filing convenience and also benefits deductions where one spouse earns up to 2x while having a “layabout spouse”. We are also tax-free on primary home gains after 2 years, but with a limit of $250k per person. Handy , I inferred that in greatcoastal ’s case the house wasn’t sold but she bought out his interest via giving him a larger share of the joint cash assets. Which isn’t income. The thing to realize with a CPA is that it’s both safe and easy for them to spend your money. It’s in their interest to be conservative and avoid audits. But it’s in your interest to be aggressive with deductions yet be prepared to defend your logic and pay the taxes if you’re audited and end up owing. If you’re debating the taxability of an extra $170K in income, the potential tax ($35k+) makes it worth paying for a second opinion before writing the IRS a big check. Ahhh, DryCreek you’re just making my previous situation worse. When enduring the knock back I couldn’t even console myself that my panda-like spouse was tax deductible. 😖 |
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