So I made a post a little while back in the relationships forum about how my mother was broke and needed to sell her house. To all of the folks who read that and responded, I would like to thank you because it really helped me put my head on my shoulders. And now, thankfully, it looks like someone will be buying the house for the full 2 million dollars, although nothing is in stone yet.
Originally my parents put $1.2 million into the house, so my mom will actually have about 800k in capital gains with the next 250k being exempt from taxes because she has lived there for more than two years. There is a potential that at the time it sells my step-father will also have been living at our house for two years by then - so that might be another 250k exempt from taxes, but this is unlikely.
Before I get into the rest, please keep in mind that I just turned 21 and am very inexperienced, so I am doing the best that I can to wrap my mind around the situation and figure out the best steps to move forward.
Also, right now she owes a little less than $1 mil on the house.
The situation is looking like (and correct me if I am wrong):
After all is said and done she would lose about 380k out of the million she keeps. Leaving her with 620k to spend.
(I'm not certain that these numbers are right, so let me know if I misunderstood something)
This is the hard part: My mother is TERRIBLE with money, so I am trying to help her find the most financially secure route she can take until she can get on her feet. And when I say terrible with money, I mean that she practically burns it.
At 21 years old, it is extremely stressful to constantly be alleviating the financial burdens of your own mother (I have spent over 40k helping her), and now is a time in my life where I am only trying to be responsible for myself so that I may help others in the future.
She will probably go back to school for a short time to become a chiropractor again btw, so it's not like she'll have no income (I hope).
Without getting sidetracked too much - how would you go about protecting this money? She wants to buy an expensive place downtown and I keep telling her that she needs to have enough money to live off for a while until she actually has income. She has literally been looking at places that cost more than the total amount that she is going to profit, but I don't think she understands this.
Should she rent a place? Should she buy? Should she invest? I have no idea and I am sorry if I haven't done an effective job at laying out the situation. Thank you for any help!
Originally my parents put $1.2 million into the house, so my mom will actually have about 800k in capital gains with the next 250k being exempt from taxes because she has lived there for more than two years. There is a potential that at the time it sells my step-father will also have been living at our house for two years by then - so that might be another 250k exempt from taxes, but this is unlikely.
Before I get into the rest, please keep in mind that I just turned 21 and am very inexperienced, so I am doing the best that I can to wrap my mind around the situation and figure out the best steps to move forward.
Also, right now she owes a little less than $1 mil on the house.
The situation is looking like (and correct me if I am wrong):
- Sell house for two million
- First 200k not taxable because not a profit (originally put $1.2 mil into the house)
- First 250k of capital gains is not taxable
- That leaves 650k taxable, which I am guessing is subject to the usual 39.6 percent + Georgia's 6% - it comes out to about 260k total taxes
- Subtract 6% from the total cost of $2 mil for the realtor (I think) and you get another 120k
After all is said and done she would lose about 380k out of the million she keeps. Leaving her with 620k to spend.
(I'm not certain that these numbers are right, so let me know if I misunderstood something)
This is the hard part: My mother is TERRIBLE with money, so I am trying to help her find the most financially secure route she can take until she can get on her feet. And when I say terrible with money, I mean that she practically burns it.
At 21 years old, it is extremely stressful to constantly be alleviating the financial burdens of your own mother (I have spent over 40k helping her), and now is a time in my life where I am only trying to be responsible for myself so that I may help others in the future.
She will probably go back to school for a short time to become a chiropractor again btw, so it's not like she'll have no income (I hope).
Without getting sidetracked too much - how would you go about protecting this money? She wants to buy an expensive place downtown and I keep telling her that she needs to have enough money to live off for a while until she actually has income. She has literally been looking at places that cost more than the total amount that she is going to profit, but I don't think she understands this.
Should she rent a place? Should she buy? Should she invest? I have no idea and I am sorry if I haven't done an effective job at laying out the situation. Thank you for any help!
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