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| *Loan,banking and credit>>>real estate tax |
How do taxes work on selling a piece of real estate? |
I'm selling 5 acres with a mobile home (probably for not much more than I have in it), but I wanted to know what kind of taxes I'd have to pay if I were to make more than the payoff (or original purchase price??? not sure how that works, either). If this is your main home and you have lived in it for two years or more then there is no tax. If it is investment property and you have owned it for more than one year then the long term capital gain tax would be 5%. Take your original purchase price and add any improvements you have made for a total basis; subtract this from what you sell it for for your gain; if any. If you have a loss then you can subtract said loss from other income on your tax return. The taxation is based on the difference between the original purchase price and the selling price. Only that amount is subject to tax which is called capital gains tax, typical rate is 15%, so up to 15% of the difference between the two prices could be owed as tax. If the home was your primary residence for two years or more, you will likely be tax exempt for capital gains. Consult a CPA on tax stategies in other situations.. For instance, you may be able to take depreciation on the property if it was used in some business venture. You'll have a capital gain if you sell it for more than your basis. Your basis is what you paid for it plus the cost of any improvements. The payoff on any loan doesn't factor into the equation. Only your cost basis and the net sales proceeds come into play. That gain may or may not be taxable. If you lived in the home for 2 of the 5 years immediately prior to the sale you can exclude some or all of the gain from taxes. The exclusion amount is $250,000 if your filing status is Single or $500,000 if your filing status is Married Filing Jointly. If you don't qualify for the exclusion the treatment of the gain will depend upon how long you owned the property. If was for one year or less, the gain is taxed as ordinary income at your marginal rate. If you owned it for more than one year it's taxed at the lower long-term capital gains rate, normally 15%. |
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