Expert: Dick Dennis - 7/15/2008

Question
I just built my own house and will be selling our previous house to my mother in law.  We are trying to find a way to sell the house to her that will keep us from paying sales tax or other expenses.  Extra costs are huge to both of us and we need to try and keep this to a minimum.  We are going to simply sell the house for what we owe on the mortgage and she would be getting here mortgage through the same place (credit union).  Any help you may have would be appreciated.  Thanks

Answer
Other than regular closing costs, Reid, I am not aware of sales tax on the sale of real estate, especially your home. But there is a capital gains (Federal) tax if you sell the property for more than what you paid for it, less the cost of any capital improvements. However, if you have lived in your home for a minimum of two years as your prime residence, there is no capital gains for the first $250,000 capital gains if you are single ($500,000 if you are married and file your income taxes jointly). In this market, I don't think you have passed those figures up. So, it doesn't seem you would be subject to taxes. However, I strongly recommend you consult with a CPA or other tax expert who should know what is apropos for Virginia. You could sell your house to your mother in law at the same price you paid for it and you or she would not be subject to taxes (that I am aware of for the state of Virginia). I wish you well.

Dick Dennis