Understanding Capital Gains Taxes

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.

Ready to sell? Know your home’s worth, click here.

Homes for sale in Carmel Valley click here.

Shirin Rezania Ramos | 858.345.0685 | www.shirinramos.com | Compass, DRE 0203379

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858-345-0685

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