Find the Hidden Wealth Inside Your Home

Physician's Money Digest, April 2006, Volume 13, Issue 4

Bottom Line/Personal

The upsurge in home values hasprompted many owners to sell their houseand capitalize on their investment. In fact,a recent Federal Reserve study found thatAmericans extracted $600 billion in cashfrom their homes in 2004. Thinking of puttinga for sale sign on your front lawn?reminds physician-investorsthat generating a large profit willtrigger capital gains taxes. If you are marriedand file jointly and are thinking of selling,the first $500,000 is excluded fromcapital gains taxes. If single, profits fromthe sale of a primary residence cannotexceed $250,000 to be considered tax-exempt.After that, homeowners may payup to 15% in federal taxes in addition tostate taxes. While paying $60,000 in taxeson a $550,000 capital gain may seemsteep, parents and grandparents could doa lot of good for the next generation byinvesting a portion of that money into a529 college savings plan. What happens ifyou or a spouse suddenly are without a joband your emergency fund has run out?Your home is collateral if you need a homeequity line of credit for any reason. Ratherthan taking on a second mortgage's long-terminterest payments, the credit line willhelp if you need it, with an interest ratewell below that of a credit card.