Switching Primary Residence to a no-income-tax state

If you don't try to get a second exemption on the same house, the IRS shouldn't have anything to complain about. But if that's the case, why bother? You can change your official residence even if you never sell the house.

Nobody is claiming the all money belongs to the government. But the government imposes taxes on everyone. And when some get a deduction that others don't, so their taxes are lower than they would have been without that deduction, it's a government handout just as much as welfare is.

Because he wants the first exemption. For that, he needs to sell the house.

but taxes are not imposed evenly to start with.

EITC = welfare, no?

Taxes which are lower than one's cost of government = welfare, no?

========================================= MODERATOR'S COMMENT: This is staying too much into the political. Please keep on topic.

I can think of a couple of reasons to bother: the death of a spouse and the eventual sale beyond the exclusion period would reduce or eliminate the exclusion if he doesn't get it now. But the mechanics of a sale and buy-back would be difficult. The exclusion doesn't apply to a sale to a related party, and an unrelated party would be wary of jumping into what smells of a sham.

The exception to the exclusion only pertains to the sale of a remainder interest to a related party.

: Because he wants the first exemption. For that, he needs to sell the house.

He wants the exemption from the State of Mass. which he can get only if he sells while a resident.

Wendy Baker

He wants the exemption from the IRS, which he can only get if he sells.

I don't think he needs to be a resident of Mass. when he sells the house to get the Mass. exclusion:

Gain from Sale of Principal Residence

Taxpayers eligible to exclude any portion of a gain on the sale of a principal residence for federal income tax purposes may also exclude the same portion of the gain for Massachusetts purposes. The maximum allowable amount of gain from the sale of a principal residence that may be excluded currently is:

a.. $250,000 for a single, head of household or married separate filer; and

b.. $500,000 for married joint filer. Generally, a taxpayer may qualify for this exclusion repeatedly if the sale is for a principal residence owned and used by the taxpayer for at least 2 of the 5 years prior to the sale.

Massachusetts adopts the federal treatment for the exclusion for Gain on the Sale of a Principal Residence under the Internal Revenue Code, as amended and in effect on January 1, 2005 and automatically adopts any future changes to the federal provisions for this exclusion.

But it sounds like the OP has checked out and now the rest of us are deciding what he wants!

I'm not looking to get the Mass capital gain exclusion on selling a principal residence. I'm looking for a way to get the federal exclusion on a "principal" residence. But, after I leave the state for some time, I'll lose that federal exclusion because when I eventually sell the house (say in 10 years) it will no longer be a principal residence

John Levine wrote in news:mjt8t5$ql0$ snipped-for-privacy@miucha.iecc.com:

The dollar value of the assessment is immaterial, as long as the comps have the same assessment. I have seen the phenomenon of politicians claiming they "didn't raise" taxes because the mill rate stayed the same

-- but the total assessed valuation jumped up significantly. In California two identical properties can have massively different tax bills. I don't see the fairness in that, but that seems to be what people want. In my city (Honolulu) they created a new tax rate for non- owner occupied residential assessed at $1 mil and above (and that isn't a mansion here either). So an increase in assessment of 1 dollar can double your tax bill if you are right at that $1 million point. Of course, non-owner occupied means non-voter owned in most cases so that explains it.

scott s. ..

Right. You want to have your cake and eat it too, as you originally stated. I don't see where disallowing that is a problem with our current tax system.

I never said it was a "problem" with our current tax system. I hope you realize that there are many legal ways to game the tax system. For instance (just two examples out of thousands:

The tax law treats index options, which look and feel a lot like options to buy and sell comparable ETFs, as Section 1256 contracts. That's a good deal because gains and losses from trading in Section 1256 contracts are automatically considered 60% long-term and 40% short-term. In other words, your actual holding period for a broad-based equity index option doesn't matter. The tax-saving result is that short-term profits from trading in broad-based equity index options are taxed at a maximum effective federal rate of only 23%. If you're in the top 35% bracket, that's a whopping 34% reduction in your tax bill. The effective rate is lower if you're not in the top bracket. For example, if you're in the 25% bracket, the effective rate on short-term gains from trading in broad-based equity index options is only 19%. That's a 24% reduction in your tax bill.

Or better yet (but this game ended with the tax reform act of 1986) here's how capital gains used to be taxed on zero-coupon municipal bonds:

Note that at 8%, $100 compounds to $1,000 in 30 years. Back in the high interest days you could have bought a new 30-year, tax-free zero coupon for $100 with a face value of $1,000. Say you sold it one year later for $108. By the then current tax rules you would have occurred a capital loss as follows:

If held to maturity this 30-year zero coupon bond purchased for $100 would have provided a tax-free capital gain of $900; or, according to the IRS, $30 in tax-exempt income each year ($900 divided by 30). But you sold it for an $8 gain. So your capital loss is $22 ($30 - $8). That is, you gained $8 but it was a $22 capital loss on Schedule D.

You see, sometimes in our stupid tax system, you can have your cake and eat it too?

Of course. It's the three year cycle that matters. Once you do that, you might as well go to 100% since the comps will all be no more than three years old.

Well, yeah, it's Hawaii. Is that $1M including or without the ground lease?

EIC was originally a "refund" of the employee's share of FICA taxes. Note that the amount without qualifying children is still exactly 7.65% until the upper limit and phase-out are reached.

As for what it has evolved into (besides TIGTA's #1 identified tax fraud issue) is best discussed elsewhere.

But those receiving such a refund are still eligible for Social Security payments based on their FICA taxes paid, even though they have been refunded.

Agreed. Or, to save frustration, perhaps not at all.

The employer's half was not refunded. Also, Social Security is not based on taxes paid, it's based on taxed earnings -- a fine distinction, to be sure. Any year in which one is eligible for EIC is going to be a year that adds very little into the potential benefit calculation, because taxed earnings are relatively low in that year by definition.

So yes, getting EIC is like getting a small subsidy on the total premiums paid for your eventual claim under Old Age, Survivors, and Disability Insurance.

Actually, if you look at EIC that way, instead of looking at it as government welfare, it starts to look just like the numerous energy, agriculture and transportation subsidies we have. ;-)

Even if you work for a state or local government employer who has opted out of FICA, you still could qualify for EIC. Here in Ohio it is common to see EIC eligible taxpayers working for The Ohio

State University, Columbus Public Schools, two large employers, pay no FICA but qualify for EIC.

Now had the argument concerned Additional Child Tax Credit, yes, FICA wages are important.

John Levine wrote in news:mkb5dv$2tbs$ snipped-for-privacy@miucha.iecc.com:

There is very little leasehold residential real estate these days. A few holdouts who didn't want to purchase their fee interest. From the days of the leasehold boom, most leases are at or near their end and as such the improvements don't really have much value without the fee interest. But by law property tax includes the lease interest value.

Honolulu (and AFAIK the other counties) have annual re-assessments.

scott s. ..

And further, in MA the tax levy itself is limited. To first order a municipality's RE tax levy can only increase 2.5% from the previous year's levy, plus new growth (i.e. new construction/property improvements). Also, the levy cannot exceed 2.5% of the entire assessed value of the municipality. The annual levy limit can be overridden by a majority vote of the registered voters of the municipality. I can't remember if the