Thursday, April 30, 2020 / by Vanessa Saunders
From Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
April 30, 2020
Congratulations! If you are thinking about selling your house this year, you’ll probably get more for it than you paid. It’s going to be another seller's market, with a shortage of homes to buy and lots of buyers competing with each other to win a bidding war. You’re one smart seller.
You may be worried about capital gains taxes. Currently the capital gains tax is 15% of the profit a property owner makes from the sale of their property. For example, if you sold your house for $200,000 more than you paid for it, you’d owe Uncle Sam $30,000 in capital gains. Also, there was an additional tax of 3.8% added in 2013 to help pay for changes in Medicare, so add another $7,600 in investment income tax in this scenario.
Sure takes the shine off that bundle you made from selling at a profit, doesn’t it?
There is one exception which makes a seller exempt from capital gains taxes. If the property was your primary home, you may qualify for the Primary Residence Exemption. This means that a certain portion of the capital gain is excluded from tax. Married couples can exclude $500,000 of capital gain from tax. Individuals or married couples filing a separate tax return can exclude $250,000 of gain from tax. So in our scenario, the entire capital gains tax would be excluded and you’d get to keep that $37,600. The only stipulation is that you must have lived in the home as a primary residence for two of the last five years.
Global Property Systems says:
If you have a large capital gain on your property, why don’t you consider selling it now, and pocketing the proceeds tax-free? Then, you can purchase another home and do it all over again five years from now because there’s no limit on how many times you can get this exclusion! You just have to wait two years in between each sale and make sure that you live in the property as your primary residence.
For more information, CLICK HERE.
Ask the Readers: Are you thinking about selling your home this year?
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