Dear Liz: My husband and I built a house on a hillside in a desirable neighborhood with beautiful views over 30 years ago. We thought it would become our retirement home, but there were different plans in life. Currently, older adults dealing with age, stairs and progressive health issues, we recommend that selling and moving to advanced support facilities is our best option before being forced to move into the environment. And we were told it was cheaper than full-time home care.
We are concerned that capital gains will remove a big chunk of sales revenue from our homes, and that is the money we need to pay for aid living. Can I use the vacant purchase price for capital gains? Can I use a bank loan to build a house against capital gains? Can I use the cost of an apartment or condo in an assisted living residence for capital gains? What other things can I use for capital gains other than typical home improvements?
Answer: Big profits don't just reduce the amount you have at the next stage of your life. It could also increase the Medicare premium for a year thanks to income-related adjustments or IRMAA.
Determine taxable capital gains by deducting taxable capital gains from home sales revenues. Your foundation includes the lot purchase price and construction costs as well as the improvements to qualified homes you have made over the years.
The two can avoid home sales profits of up to $500,000 from the capital gains tax. Capital gains can also be reduced if there is capital loss, i.e. when you sell stocks or other assets for loss.
What you do with money doesn't affect the capital gains tax you pay. Decades ago you could postpone capital gains by buying another home of equality or greater value, but that's not the case anymore.
There may be alternatives to mitigate the impact of profits, such as installment sales, which buyers pay over time. Another option is to rent a house rather than selling it.
Tax professionals can provide guidance.
Dear Liz: I am one of the beneficiaries named by the will of my late relatives and plan to spend money to buy a new car. Do I need to pay cash upfront and avoid interest on my loan or set up a monthly payment to strengthen my credit score (now under 800)?
Answer: Auto loans can charge a score, especially if you don't already have an installment loan, such as a credit report mortgage. However, credit scores usually earn the highest rates and conditions from lenders throughout the 700s. There is no other reason than bragging rights.
Dear Liz: My social security is much higher than my husband's society. He started taking him at age 62 and I started at full retirement age of 67. If I die in front of him, can he start to reduce my social security somewhat? My current payment before Medicare Premium was around $3,700, and he was around $1,700.
Answer: If your husband reaches his own full retirement age at the time you die, the benefits of his survivor equal 100% of what you were receiving. He began his own benefits early, so the benefits of survivors are not reduced.
If he must die before he reaches full retirement age and he begins to provide survivor benefits, that amount will decrease for an early start.
Liz Weston from Certified Financial Planner® is a personal financial columnist. 3940 Laurel Canyon, No. You can submit your questions using the “Contact” form on 238, CA 91604, Studio City, or Asklizweston.com.