Q: I recently sold my house for a profit. I want to avoid paying capital gains taxes on the money. What are my options? Can I purchase a piece of undeveloped land, or do I have to buy another dwelling to avoid paying the capital gains taxes?
Lisa Haglauer, Baltimore
A: To defer the payment of capital gains taxes after the sale of a home, you must buy or build your new home and occupy it within two years after the settlement of the sale of your old house.
For a new house, the construction must be completed and you must move into the house within the two years. The purchase of a lot or an undeveloped piece of land alone will not defer the payment of the capital gains taxes on the sale of your old home. In addition, to defer the taxes, you must buy or build a house at a cost that is at least equal to the sales price from the sale of your old house.
If you are at least 55 years old or older, and you sell your home, you are allowed to realize a tax-free capital gain from the sale of your house up to $125,000.
Q: Does the seller disclosure law pertain to new houses as well as resale houses? If not, does a new-home builder have to disclose whether a deck to be constructed requires a county variance and whether a prospective house falls within the critical tidewater area?
Patricia Krebs, Baltimore
A: While Maryland's seller disclosure law applies to all sales contracts entered into after Jan. 1, 1994, both new home sales and foreclosure sales are exempt. In addition, a seller of an existing house can choose to provide a "disclaimer statement," which indicates that no warranties are being made and that the )) house is being sold "as is" instead of providing the seller disclosure form.
Even though a new-home builder or seller is exempt from Maryland's existing seller disclosure law, a builder or new-home seller is still not allowed to make a material omission or misrepresentation in the sales contract for the house. The omission of whether the deck would require a county variance or whether a home falls within the critical tidewater area may be such a material omission depending on the surrounding circumstances of the transaction.