If your home’s value has soared, congratulations. If you decide to sell, beware.
Financial advisor James Guarino says some clients don’t realize that home sale profits are potentially taxable until their returns are prepared — and by that time, they may have spent the windfall or invested the money in another house.
”They’re not happy campers when they find out that Uncle Sam not only is going to tax this as a capital gain, but they’re also going to have some exposure at the state level,” says Guarino, a certified public accountant and certified financial planner in Woburn, Massachusetts.
In my latest for the Associated Press, understanding how home sale profits are calculated and how you can legally reduce your tax bill.
Good day: My name is Rosalie Gottfried and I’m 86 years of age. I am legally blind but manage to live alone at this time. Years ago I purchased several annuities, some of which have already matured, giving me lifetime income and some which are yet to mature next year and the year after. Currently, the income I receive from my matured annuities plus social security is sufficient for my needs but I expect things will change within the next 2-3 years when my loss of vision will necessitate moving into an assisted living facility. Since I live in Calif., the cost for such facilities will run somewhere between $10,000 and $14,000 a month. The 2 annuities that already give me income pay me approx. $36,000 a year plus $10,000 in social security. What I will need is between $110,000 -$120000 a yearfor assisted living. The 2 annuities that will mature in the next 2 years have 2 options: I can take 10% a year for 10 years and that’s it, or I can take 5% a year for the rest of my life. With Option #1 I will receive the necessary funds bot at the end of 10 years, it’s finished . With Option #2, I will receive half of Option #1’s payout, but it will continue for the rest of my life. I must make this choice before I reach age 90. My C.p.A. advises me to take Option #1; my daughter advises me to take option #2, and my Certified Financial Planner had his license taken away and spent a year in State prison. I contacted the annuity company and they do not offer financial advice. If I knew for sure I would die within 10 years, the choice would be simple. But man plans and Fate laughs and I simply don’t know what to do. Can you help?
I’m sorry that you had such an awful experience with your CFP! I’m not able to provide individualized advice but another CFP (one affiliated with http://www.napfa.org, perhaps), CPA or a CPA-PFS should be able to help you.