Capital gains/tax question.

[rut-ro]

Before I get a lawyer I wanted to do a little research on my own. If you own a house (that you do not live in it’s just an extra house that’s paid off) and you sell the house for 275k how much in taxes can you expect to pay? Is it the 31% or are there other factors ?

When the house goes on the market, there will be no other house purchases

Just curious if anyone has done this

[jaspermac]

You only pay on your growth. That is the difference in what you paid or what it was worth when you inherited it minus the sale price. It’s 15% not 31%.

[Trickyrac]

I did a little googling and Turbo tax says that if it isn't your main residence, then it will be taxed at the capital gains tax rate of up to 15%. They say it isn't technically a capital gain, but is treated as such. I haven't done it, but I have researched it in the past.

Good luck with the sale!

[rut-ro]

Thanks fellas. It’s not a main residence. It was purchased for 200k and is appraised at 275k. Houses in the same neighborhood are going like hot cakes.

[Grayson]

You need to consult with a CPA.

[RR 314]

Thanks fellas. It’s not a main residence. It was purchased for 200k and is appraised at 275k. Houses in the same neighborhood are going like hot cakes.

In short, your cost basis is $200K. If you made any major improvements (not standard maintenance) that can increase your basis. You only pay tax (likely at the 15% rate—if held more than a year) on the difference between the sales price and basis.

[Acameron52]

Good problem to have!

[rut-ro]

So what I am understanding, there will be no tax on the initial 200k investment? We will be getting advice from a CPA/Lawyer I just wanted to get a ballpark idea from the green screen brain trust

[RdRdrFan]

Talk to your CPA.

15%/20% tax rate on long term capital gains dependent on income level. Most assume that it’s 15% but you’d be surprised how many folks end up in the 20%. Gain is sales price minus the cost basis.

Talk to your CPA.

[jmac24]

you pay tax on the gain and your gain is only the difference in what you have in it and the net sales proceeds. I would find a lot of receipts for the improvements I made!!!

[eliteweldingco]

Wouldn’t it be taxable for the difference in appraisal value when you acquired it and at the time of sale? I believe this was mentioned above.

[Take Dead Aim]

Wouldn’t it be taxable for the difference in appraisal value when you acquired it and at the time of sale? I believe this was mentioned above.

Appraisal has nothing to do with it. Its purchase price versus selling price. Taxes are on profits.

[Aggie PhD]

The 75k in proceeds would be taxed as ordinary income if is is considered a short term gain. Real estate has a different set of rules than stocks as to what is considered short versus long term

I believe for real estate to be considered as long term you have to hold it for 2 years
Not the one year of stocks

So depending upon your current tax bracket will determine what the tax will be if short term

[Slew]

In short, your cost basis is $200K. If you made any major improvements (not standard maintenance) that can increase your basis. You only pay tax (likely at the 15% rate—if held more than a year) on the difference between the sales price and basis.

This is how I understand it!

[SabineHunter]

The 75k in proceeds would be taxed as ordinary income if is is considered a short term gain. Real estate has a different set of rules than stocks as to what is considered short versus long term

I believe for real estate to be considered as long term you have to hold it for 2 years
Not the one year of stocks

So depending upon your current tax bracket will determine what the tax will be if short term

Aggie is right on