Are you planning to sell your property? Here’s what you need to know about capital gains taxes to ensure a smooth transaction.
- Short-term vs. Long-term: Capital gains and losses are classified based on how long you hold the property before selling it.
- Determining Basis: Your basis in your home is crucial for calculating gains or losses when selling. It’s determined by factors like initial cost, inheritance, or fair market value.
- Current Capital Gains Rates: Net capital gain is generally taxed at rates up to 15%, with a new 20% rate for higher taxable incomes.
- Tax-Free Exclusion: Single homeowners can exclude up to $250,000 of capital gains, and for married couples filing jointly, it’s up to $500,000.
- One-Time Exclusion: The exclusion is allowed every two years, and there’s no requirement to reinvest the proceeds in a new residence.
- Ownership and Usage Criteria: You must have owned and lived in the property as your primary residence for at least two of the last five years to claim the exclusion.
- Real Estate Depreciation Recapture: When selling a property used for business purposes, depreciation recapture may require paying tax at ordinary income rates.
Source: California Title Company
Remember, it’s essential to discuss capital gains and the title and escrow process with your tax professional during the transaction to be fully prepared.
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Shirin Rezania Ramos | 858.345.0685 | www.shirinramos.com | Compass, DRE 0203379
