Because home values have increased so much throughout the years, sellers are now having to consider if they will owe a capital gain tax.
The capital gain tax is different from income tax and property taxes. Income tax are the taxes withheld from your paycheck. Property taxes are the annual taxes you pay the County Assessor’s office based on the value of your home when you bought it plus annual 2% adjustments.
Capital gain taxes are the profit you make on a property you sell. If you lived in the property 24 months out of 60 months of ownership and you make above $250,000 if you are single or $500,000 if you are married, you will pay taxes the amount over the $250,000 or $500,000. Example: You bought a home 10 years ago for $100,000 and today you are married and sell this home for $800,000, you will pay capital gain tax on $200,000.
Here’s the example: $800,000 - $100,000 = $700,000 exemption is $500,000 tax-free and balance of $200,000 is taxed as capital gain.
The capital gain tax above $250,000 or $500,000 is incurred at 0%, 15%, or 20%, depending on your income. There are some exemptions to NOT pay capital gain.
If you are thinking of selling, CALL ME, and let’s see where you are as to capital gains. Click below to see exemptions and other great information.
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Source: CNBC
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