I have a couple of helpful tips for you about capital gains taxes. For example, the amount you are exempt from changes depending on whether you’re married or not.
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The number one question I’m asked by home sellers is about the kind of taxes they’re going to have to pay to close their transaction. First off, I’m not an accountant, and you should consult with yours before you make any financial decisions. However, I do want to talk to you a little bit about capital gains taxes.
The number one question I’m asked by home sellers is about the kind of taxes they’re going to have to pay to close their transaction. First off, I’m not an accountant, and you should consult with yours before you make any financial decisions. However, I do want to talk to you a little bit about capital gains taxes.
Capital gains refers to the difference in money between the purchase price of a home and what you end up selling it for. Let’s say, for example, you purchased a $250,000 house and sold it for $500,000, the capital gains on that property would be $250,000.
You can reduce your capital gains by keeping track of your cost basis, aka how much money you put into improving the home. Let’s say you put $50,000 of improvements into that same $250,000 home and end up selling it for $500,000. With a new cost basis of $300,000, the capital gains would only be $200,000.
This is important because as an individual, you can become exempt for up to $250,000 in capital gains taxes. If the home is your primary residence and you’ve lived there for two of the last five years, you qualify. If you’re a married couple, you’re exempt for up to $500,000 in capital gains taxes.
The only caveat is that you can’t have sold a home within the last two years and used the capital gains exemption. There are a few exceptions to that rule as well.
Consult your tax professional before making any decisions.
I know this topic can get a little confusing. If you have any additional questions, I advise you to seek out a tax professional. We’d be more than happy to connect you with one if you just want to give us a call.
If you have any other real estate related questions, we are always here to help. We look forward to hearing from you soon.
If you have any other real estate related questions, we are always here to help. We look forward to hearing from you soon.
