Legal Question in Real Estate Law in Maryland

Capital gains taxes only accrue on the GAIN or increase over adjusted basis in the property. It is somewhat atypical in this market for a home only owned 1.5 years in Maryland to have accrued significant taxable gains after accounting for all the costs of sale. For instance, lets say someone purchased a house for $100,000 in 2015 and sold it in 2016 for a 25% increase at $125,000. Lets further assume that the Seller made $10K in capital improvements over the course of their ownership and paid another $10K in closing costs for the second sale. You can subtract things like transfer taxes and recording fees and real estate commissions from the sale price for purposes of calculating gain. In such a scenario even though the house sold for $25K more than the original purchase, the capital gain would be $5K (the difference between the sale price of $125K and the adjusted basis of $120K) and that lesser amount would be taxed at the capital gains rate.

Yes, there is a way to delay capital gains taxation by doing a 1031 exchange. The IRS allows someone to sell real estate and purchase replacement real estate (it can be located somewhere else and a different kind of property) without paying capital gains tax at the sale IF a qualified third party holds the money in between the two sales and it never touches the owner's hands. There are rules on the timing and such but if one anticipates significant capital gains a 1031 exchange is something to explore.

The IRS may also allow an exception if a relocation is forced by job loss.

The above is NOT intended to analyze your specific situation and you may want to consult with a tax professional to figure out your specific taxable gain and/or potential tax liability. You may also want to contact qualified intermediaries to talk about 1031 exchanges. While not legal advice I hope that this general information helps!