All Forum Posts by: Shirley McLean

Thank you @Ashish Acharya. Great information and this helps so much. It is my primary residence. Not so much worried about any loss but am happy I won't have a big bill on any possible gains. We will see how it pans out after the sale. 

Crossposted in Texas forum

Hi,

I'm in Texas and my dad passed away nearly 2 years ago. I inherited his home which is paid for. I've been living in it and have done heavy home renovations. I know that if I put it up for sale (before my 2yr live in anniversary), I am subject to capital gains tax on the difference between the cost basis (FMV) at the time of his death subtracted from the sale price. However the following may affect the tax.

1. I did not get an appraisal but I did get a home equity loan to do renovations. I'm assuming the cost basis will be based on that loan value on the house. I think they had to do an estimate of value for me to get the loan.

2. I'm self employed and my adjusted net income is about $25k which I read is in a cap gains bracket of 0%. Is this the case?

3. I have done at least $15-20k in renovations. Does this count as capital improvements? Does this get added to cost basis?

a. Example: House cost basis $180k, sale price $195k, cap gain is $15k, renovations $20k, cap loss is $5k

4. If I do owe 0% after the sale b/c of lower income, do I still qualify for a capital loss? Renovations included new granite in kitchen and bathrooms, new commercial stainless kitchen sink, new vessel sinks in bathroom, new tiled shower, new vanity mirrors and fixtures, new LED lighting and 4 ceiling fans throughout, new vinyl plank floors with new carpet in bedrooms, new interior and exterior pain, stained deck, new fence on 3 sides, chimney repair, new cabinet hardware and new door hardware throughout, new plumbing fixtures, added channel/french drain at end of driveway for water pooling, added drainage near front of house to divert rainwater, added landscaping beds, river rocks and pavers in backyard in shaded area where grass will not grow, replaced IG thermal glass window.

Hi,

I'm in Texas and My dad passed away nearly 2 years ago and I inherited his home which is paid for. I've been living in it and have done heavy home renovations. I know that if I put it up for sale (before my 2yr live in anniversary), I am subject to capital gains tax on the difference between the cost basis (FMV) at the time of his death subtracted from the sale price. However the following may affect the tax.

1. I did not get an appraisal but I did get a home equity loan to do renovations. I'm assuming the cost basis will be based on that loan value on the house. I think they had to do an estimate of value for me to get the loan.

2. I'm self employed and my adjusted net income is about $25k which I read is in a cap gains bracket of 0%. Is this the case?

3. I have done at least $15-20k in renovations. Does this count as capital improvements? Does this get added to cost basis?

   a. Example: House cost basis $180k, sale price $195k, cap gain is $15k, renovations $20k, cap loss is $5k

4. If I do owe 0% after the sale b/c of lower income, do I still qualify for a capital loss? Renovations included new granite in kitchen and bathrooms, new commercial stainless kitchen sink, new vessel sinks in bathroom, new tiled shower, new vanity mirrors and fixtures, new  LED lighting and 4 ceiling fans throughout, new vinyl plank floors with new carpet in bedrooms, new interior and exterior pain, stained deck, new fence on 3 sides, chimney repair, new cabinet hardware and new door hardware throughout, new plumbing fixtures, added channel/french drain at end of driveway for water pooling, added drainage near front of house to divert rainwater, added landscaping beds, river rocks and pavers in backyard in shaded area where grass will not grow, replaced IG thermal glass window.

@Jonathan Pflueger I called a credit union (i joined recently) and asked about a personal line of credit which is what you are speaking of I believe. The loan officer said I may still be able to get a Home Equity Loan without waiting til the new year to apply (after homesteading it in my name). I sent him what he needed to verify so now I am just waiting. I'm assuming a loan is better than a personal line of credit b/c the line of credit may lower my credit score more and have higher rates. Thank you.

@Kevin Romines Thank you. I keep no balance on my 3 credit cards b/c the rate is like 24%. I could apply for a 0% APR new card which is looking like that is what i might do, but they usually only start new customers with like $3k before gradually increasing it. I may have a friend. That may be my only option without having to move in, homestead, wait for loan, wait for renovation, wait forever to sell :/. I'm trying to move out of town so I'm not wanting this to drag on but I appreciate your reply.

I own a home free and clear but need to do renovations to it before selling it. It is not homesteaded under me b/c I just acquired it and cannot homestead (from what I've been told) til Jan 1st. I want to get it on the market renovated around that time so I don't want to wait for a HELOC or HEL which I believe requires homesteading the house. If I want to get a loan now for renovations (say $20k give or take) without waiting forever, would a renovation loan of some sort or a hard money loan be my best option without paying ridiculous interest rates or tons of fees???? I have good credit so that's not an issue but i'm self employed so taxes show lower income. I have low debt to income though. I owe like $4k for a student loan and that's about it. Monthly payment requirement on that is like $32. Also, I don't want to pay back the loan until I sell the house after the renovation so timeline is like a month or month and a half for renovation then how ever long it takes to sell after the new year. In my area, people are looking for 3 bedrooms under $200k so I don't expect after renovation that it is on the market long.

@Andrew Postell thank you. it does help. i just need to know what the terms of the loan would be and interest rates but it sounds like a great solution to my problem. I'll DM you to see if you can expand on this.

@Andrew Postell can I get a renovation loan without needing a mortgage loan as well? the house is free and clear, it just needs improvements before I can sell it. if I can get a renovation loan, do I have to pay that back before the home sell or can i pay it after i sell the house?? thank you.

I own a free and clear home that I want to renovate and sell. If I get a HELOC or HEL, I believe I have to homestead the house before applying for the loan which means waiting until Jan 1st. I don't know that those are the best options if I plan to sell because I'm not sure if you have to pay off the loan before selling the house. Cash out refi has high costs I believe. I have a credit score over 700 and 100% equity, but lower income on tax statements (due to being self employed). I don't want to pay high closing costs or spend months waiting to apply for a HELOC/HEL then closing time then renovation. What's the best way for me to get funding for renovations now without paying a fortune in interest for personal loans or high interest credit cards?? After the house is renovated, I plan to sell it. It probably needs about $20k in renovations including new appliances. Thank you.

@Andrew Postell thank you so much. plans have changed a bit. I want to renovate the house then sell it. i also don't want to wait to homestead the house til jan 1st b/c then i have to wait for closing on the HELOC of about 45 days and another month for renovations. That's too long. I am trying to figure out the best way to get some type of loan now so I can begin renovations and sell after the new year.