What Philadelphia Home Sellers Need to Know About Capital Gains Taxes

Capital Gains Taxes

Did you know that you must pay taxes on the profit on a home sale or investment property? Considering the highly high toll taxes can take from profits, this is one surprise it is better to avoid when you have made such a considerable investment of time and money. When the value of an investment in capital assets, such as real estate, experiences growth and is subsequently sold, there is a tax on the capital gain. When the acquisition sells, the capital gains are said to be realized by the investor. The IRS approaches taxes on these gains differently, depending on whether the investor held the short- or long-term assets. Investors can deduct your cost basis or original purchase price to determine the capital gains. You can subtract the cost basis and any improvements from the profit from the capital gains. From acquisition to resale, planning your investments should be completed before you ever close on your first real estate investment. A significant part of this business plan should include avoiding capital gains taxes when it is time to exit a property. We will explore more about what Philadelphia home sellers need to know about capital gains taxes.

Limits

These taxes are capped at a specific limit to restrict government revenue growth. Philadelphia home sellers need to understand how these rate limits on capital gains taxes will affect their investment. A capital gain rate of 15% will apply should your taxable income be at least $80,000 but less than $441,450 for single filers, $496,600 for married filing jointly or qualifying widow(er), $469,050 if you plan to file as head of household, and $248,3000 if you are married filing separately. A rate of 20% will apply to any gain over the top threshold of the 15% rate, with some exceptions. In addition, individuals with significant income may be subject to a Net Investment Income Tax (NIIT). If your capital gains are in the red because of capital losses, the amount of excess loss you can claim is limited.

Married vs. Single

In many cases, there is an exclusion available every two years for Philadelphia home sellers on capital gains taxes of up to $500,000 over cost basis for married couples filing jointly for single home investor. The exclusion is a $250,000 over price basis. One of the qualifying requirements for this exclusion is that the real estate will have been lived in for two of the last five years as your primary residence, though they need not be consecutive.

You may be required to make estimated payments on your capital gains. It is wise to consult with a tax advisor to ensure you make the right moves for your investments. Deferrals of capital gains are allowed under a 1031 exchange of like properties. You can put into place strategies to offset these taxes with capital losses. Ensuring you have covered all of your bases means it is essential to have built a strong team of professionals to help guide you because you want to keep as much of your money as possible. 

Buying Property 215 understands just what Pennsylvania home sellers need to know about capital gains taxes and what you can do to avoid them – sell my house to Buying Property 215 or buy a “like-kind” investment from our inventory of superb investment properties (single-family houses or multi-family dwellings!) We make it easy to keep your hard-earned investment profits at work, earning wealth and long-term passive income for you! Call us at [215-359-6090] or send us a message today to learn more about the process of selling property!

Buying Property 215
Buying Property 215

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