What are the Capital Gains Tax Laws Regarding the Sale of my Home?
First let me inform you I’m a Real Estate Broker, not an accountant. Your tax specifics are going to be individually specific relative to other situations in your life. So, talk to your taxman before consummating any major decisions.
Some General Tax Information: Capital Gains taxes are due when you sell Real Estate which you have owned for more than a year at a profit. The Capital Gains tax rates are between 0% and 20%.
You are allowed an exemption when selling your home. You can exclude $250,000 of your profit if single, and $500,000 if you file jointly as a married couple. Requirements for this exemption are as follows:
1.The Home must be your primary residence.
2.You must have owned the home for at least two years.
3.You must have lived in the home for at least two of the last five years.
Should you receive a greater profit amount than the allowed exemption you may be able to deduct some home improvements (documented) as well as selling expenses. For guideline of what can and cannot be deducted read IRS Publication 523 (It’s online).
Your tax rate for any capital gains taxes owed is as follows:
1.If you’re in the 10% to 15% tax bracket, your capital gains tax rate is zero.
2.If you’re in the 25% to 35% tax bracket, your capital gains tax rate is 15%
3.If you’re in the 39.6% tax bracket, your capital tax gains rate is 20%
There are some exceptions to these rules and in other cases partial exemptions are possible. Before you make any committed decisions with your finances, please consult your tax advisor or refer to IRS Publication 523.