Buying with a home equity loan

[Lisa Wright]

Hiya,

I'm waiting for approval for an equity loan to purchase a house.  It's pretty beat up so I need the gap before moving in. My plan is to sell this in Spring when the market kicks back in.  

Am I going to get tagged with capital gains because I'm not immediately rolling sale proceeds into the new property?  I've been here 5 years, and plan to pay off the loans in full when I sell my current.  (probably obvious but so you have the info).

I could go on about the loan and how annoying that process is.  No pre approval letter so I can't put an offer in, but that is a whole rant...

Thank you- Lisa 

[Chris McCormack]

Hi @Lisa Wright, might help to provide further information. The HELOC on your current home will come to you tax free - IRS says all debt is free of tax. If you are wondering what happens if and when you sell your current home there are a few situations. If its a primary residence and you've lived there for a few years, you may qualify for an exclusion - talk with a tax professional about this.

If its an investment property you're looking to sell then yes you would need to consider finding a property of equal or greater value and consider the 1031 exchange. There are a few other options but without all the details its hard to tell. A CPA / tax strategist will be happy to help you.