Dear Liz: My husband and I built a house on a hill over 30 years ago in a desirable neighborhood with a beautiful view. We thought it would be our retirement home, but life had different plans. Now, the elderly, dealing with age, stairs and progressive health problems, we have been informed that sale and move in a senior assisted life center is the best option for us before we are forced to move. And, we said it would be cheaper than having full -time care at home.
We fear that capital gains will remove a large part of the sales product of our house, and this is the money we have to pay for assisted life. Can we use the purchase price of the vacant lot in relation to capital gains? Can we use the bank loan to build the house against capital gains? Can we use the cost of an apartment or a condo in an assisted life residence against capital gains? What other things can be used for capital gains other than general improvements in the house?
Answer: A significant gain would not simply reduce the amount of money you have for the next phase of your life. It could also increase your Medicare premiums for a year, thanks to the amount of adjustment linked to income or IRMAA.
You will determine your potentially taxable capital gains by deducting your tax base from your domestic sales products. Your database includes the pricing of the lot and the cost of construction, as well as all the eligible domicile improvements that you have made over the years.
You can house up to $ 500,000 in house sales benefits from capital gains taxes. Capital gains can also be reduced if you have capital losses – in other words, if you have sold actions or other assets for a loss.
What you do with money does not affect taxes on the capital gains you pay. Decades ago, you could postpone capital gains by buying another house of equal or higher value, but this is no longer the case.
You can have alternatives to reduce the impact of earnings, such as a payment sale where the buyer pays over time. Another option would be to rent rather than sell your home.
A pro tax can provide advice.
Dear Liz: I am one of the beneficiaries appointed in the will of my late parent and I plan to use the money to buy a new car. Should I pay in cash in advance and avoid interest costs on a loan or establish monthly payments to help improve my credit scoring (currently just under 800)?
Answer: A car loan can increase your scores, especially if you do not already have a loan for payment such as a mortgage on your credit reports. But once your credit scores are high in the 700s, you generally get the best prices and conditions of lenders. You would pay interests for no reason other than brainy rights.
Dear Liz: My social security is much higher than that of my husband. He started taking his 62 years old and I started at my full 67 -year -old retirement age. If I die in front of him, can he start to take my social security at a reduced rate? My current payment before any Medicare bonus is around $ 3,700 and its own is around $ 1,700.
Answer: If your husband has reached his own retirement age when you die, his survivor service would be 100% of what you receive. The survivor's advantage would not be reduced because it started its own advantage early.
If you die before reaching the retirement age and it begins the survivor's services, the amount would be reduced for early start.
Liz Weston, certified Financial Planner®, is a columnist for personal finance. Questions can be sent to him at 3940 Laurel Canyon, n ° 238, Studio City, CA 91604, or using the “Contact” form Asklizweston.com.
