What Taxes Do I Pay When Selling My House?
Did you know Uncle Sam taxes home sales? Though you worked hard to buy your home, you might not be able to keep all the proceeds after the sale. So don’t overestimate the amount of money you will pocket after your home has appreciated in value. It is no secret that home prices are on the rise, yet you probably won’t be able to keep 100% of the profit after this shrewd business move.
An Inside Look at Taxes After a Home Sale
Fail to account for taxes, and you will be disappointed with the total amount of money you pocket following your home sale. If you are making money on the sale, be sure to budget in some funds for taxes. A large profit after a home sale will spur a considerable tax bill. However, there are some situations in which you will owe no taxes at all after your home sale.
Capital gains taxes are paid after selling a home for a profit if the seller fails to qualify for a special circumstance or an exclusion. This specific tax tends to be particularly high on rental and vacation properties as opposed to primary homes. It must be noted that those who qualify for the capital gains tax exclusion do not qualify for a subsequent exclusion unless two years pass.
If you have lived in the home you are selling for two of the previous five years as an owner, you might be able to avoid the capital gains tax. However, if the profits are in excess of a quarter-million dollars, and you are a single filer, the money will be taxed. If you are a joint or married tax filer, and the profits from the home sale are in excess of $500,000, the profits will also be taxed.
Capital Gains Tax Exclusions
Exclusions to capital gains taxes are not applicable to investment properties or second homes. Therefore, if you are selling a second home or one in which you have an investment interest but don’t use as your primary residence, the capital gains taxes will be applied to your profits.
A home sale profit that exceeds the exemption amount triggers capital gains taxes. If the home was owned for less than a year, the gains stemming from the sale are taxed at the same rate as your income tax. The long-term capital gain tax rate for individual and married filers differs by income level. Those who do not qualify for tax exclusion as detailed above might qualify for one of the IRS’s special considerations, which are applied when determining capital gains taxes.
As an example, an individual who qualifies for official extended duty when working for the government or military and is stationed more than 50 miles from home or required to live in government housing will enjoy a waiver of the two-year minimum. A spouse’s death or a divorce can also qualify home sellers for the exclusion.
Real Estate Transfer Taxes
Home sellers are required to cover the cost of real estate transfer taxes. Also referred to as the title fee or government transfer tax, this tax is a specific percentage of the sale price. The real estate transfer tax differs by each state and city.
What About 1031 Exchange Taxes?
If the home was purchased through a like-kind exchange, meaning it was an investment property essentially swapped for another, taxes might apply. Also referred to as 1031 exchanges, this strategy is under scrutiny by the Biden administration. The 1031 exchange empowers you to roll over profits from your second home sale to a separate investment property within a period of 90 days from selling, subsequently deferring your taxation liability for capital gains. Such a process mandates the assistance of an intermediary and also requires adherence to specific guidelines. If the house you are selling was purchased through such an exchange within the prior five years, an expatriate tax will be applied.
Cash for Vegas Homes Wants to Buy Your Home
Do you want to sell your house? Contact Cash For Vegas Homes today. We buy houses throughout the greater Las Vegas area. We pay cash for Vegas-area homes, helping you sell your house fast. In some cases, we buy houses in as little as two days. You can reach our home buyers to obtain a cash offer for your home by dialing (702) 850-8001. You can also contact our Vegas home buyers online by completing our contact form.