Will You Have to Pay Capital Gains Tax When You Sell?
When you sell real estate, you may have to pay capital gains tax.
Because the IRS requires anyone who sells a capital asset for a profit to pay tax on that profit …ONLY if certain conditions apply.
What’s a “Capital Asset”?
Capital assets include investments (stocks, bonds, etc.) , personal property (art, furniture, electronics, automobiles, etc.), and real estate, such as a primary residence, investment property, commercial property or 2nd home.
Here’s What Determines Whether or Not You’ll Pay.
Let’s take a look at residential real estate.
Whether or not you’ll be taxed depends on how long you’ve owned the property, how you occupied the home, how much your profits are after acquisition costs, and possibly some other factors.
You’ll want to consult with your tax professional, but in most cases, your profits will be exempt if ALL of these conditions are met:
- You’ve owned the home for at least 2 of the last 5 years
- You’ve used the home as your primary residence for at least 2 of the last 5 years
- You haven’t excluded the gain from the sale of another property in the two year period before the sale.
If you meet all of those conditions, you’re likely exempt from taxes on profits of up to $250,000 if you’re single or $500,000 if you’re married filing jointly.
What’s Considered Your Profits?
Your profits are typically considered your sales price minus your costs to sell, your acquisition costs, and documented upgrades.
Again, check with your tax professional and explain your unique situation.
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Thanks for reading this and I look forward to sending you the monthly report for your neighborhood!
P.S. In case you’re one of the people (like me) who skim to the P.S. before you read the page, here’s what this is about:
1. If you sell a house, townhouse or condo, you may have to pay a capital gains tax.
2. Whether or not you’ll have to pay typically depends on three variables.
3. A free report that shows you what’s REALLY going on with home prices in your neighborhood. (If you want to skip the article and check out the free report, you can do that here.)
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