Will Moving Early Cause Capital Gains Taxes?

Q: I am a homeowner of 18 months getting ready to move from Portsmouth, VA to Pensacola, FL with no plans to return to this erea. I don't know whether to rent my place out or sell. I am an active duty navy doc, planning to be a flight surgeon. I bought my condo for 165K, my real estate agent thinks we can sell it easily for 200K. The value is expected to continue to increase. I am not sure if it is worth it to rent, I am very confused about capital gains and the rules as they apply to my situation.

Lt. McNiff

A: You should review, first, your lifestyle choices. Do you HAVE to sell? Can you hang on to it for a while? Can you buy another home without the funds from the sale of your VA home? Will rent cover your monthly expenses? If you put the money in another fund, will you have as much return?

Your biggest challenge is the fact that you haven’t been in the house for more than 2 years. You will be able to reduce your capital gains tax because you are moving for your job. There’s more information at www.irs.gov regarding that. Where are you moving? What are the appreciation rates like there? You need to sit with an informed mortgage professional who can run through the numbers. In addition, you may want to call your tax professional to get a read on what your tax liability would be on the gains.

Visit http://www.irs.gov/faqs/faq10.html to see some FAQs regarding Capital Gains and the sale of a home.