Are you having trouble figuring out how to maximize your capital gains when selling your home? If yes, why not try a professional? The truth is, coming up with the right estimation isn’t one of the simple DIY tasks such as filing a case and letting an attorney to the hardest part for you. It involves lots of math, and if you don’t know how to do it, tax agencies will do it for you and that’s not what you want.
If you didn’t know, you could now save up to $500,000 of your capital gains. However, this highly depends on the steps you take. What you must know is that this isn’t an easy task. The question is, must you do it the hard way? Why not partner with someone who knows how to do it better? As TaxMedics In Kennewick, WA, helping you get what’s rightfully yours and seeing you happy is what keeps us going.
With more than enough experience dealing with capital gains tax on real estate, we are %100 percent sure, you’ll be seeing us again soon. To get a clue of what it takes to maximize your capital gains on real estate, here are some of the things you need to understand.
How To Fugure Out A Capital Gain Tax On Real Estate
When selling a home, capital gains represent the difference of your real estate’s buying price and the selling price. Capital tax gain, on the other hand, is the amount you pay on the difference, but after making some adjustments such as deductions, tax breaks and more.
Let’s take for example you purchased your home at a price of $200,000. You then spent up to $80,000 to make some improvements, meaning that the total deductible costs of purchasing the house is $280,000. Luckily enough, you get someone who is willing to buy it at a price slightly higher than that, let’s say, $480,000 accompanied with other expenses such as real estate’s agent commission, extra fees or any other closing costs you are willing to pay.
If the selling costs add up to $40,000, then your adjusted selling price will be $440,000. Here is how to do it.
CALCULATING CAPITAL GAIN
ADJUSTED PURCHASE PRICE = Original price + costs of improvements
= $200,000 + $80,000 = $280,000
ADJUSTED SELLING PRICE = Selling price – real estate’s commissions + any other
Costs of selling the house
= $480,000 -$40,000 = $440,000
CAPITAL GAIN = $440,000 - $280,000 = $160,000
FACTORS TO CONSIDER
• CAPITAL TAX GAINS EXCEPTIONS
After getting the capital gains, you now move to the next step that is, finding out what other exemptions you are entitled to. In most cases, you’ll realize that you can exempt up to $250,000 of your capital gains that is, if you’ve lived two years of the five years due to the sale. You will also realize that you can exempt up to, $500,000 that is, if you are married. What you must realize is that, anything below the amounts mentioned above are not taxable.
HOW LONG HAVE YOU OWNED THE HOUSE?
This is another factor vital to maximizing your capital gain taxes. What you must know is that, if you bought the house that was sold at a period below one year, the taxation rate would be the same as regular income.
If you bought the house that was sold five years, you’ll be taxed at a lower rate. For example, If the capital gain that is taxable is $200,000 and you have to pay a 25% tax, then you’ll pay, $50,000.
You must also know that you’ll be taxed depending on the tax brackets in case you owe taxes. If you are in 10% to 15%, your tax gain is 0, 25% to 35%,, your rate for capital tax gain is 15 percent and last but not least, if you are in 39.6 tax bracket, you’ll be taxed 20%.
THE MAIN ISSUE
The bad news is, you must be forced to sell a house before you meet the requirements. You might have owned the house for five years but haven’t lived in it. You might also be divorced or newly married. As a result, you’ll be forced to make very challenging decisions in order to get the best out of your tax gains. For example, if you are married, but live in separate residences, you are supposed to exclude up to $250,000.
You can also get up to $500,000 exclusion if you are lucky to qualify for double tax breaks. This isn’t an easy task especially if you don’t know how to go about it. Most tax agencies will deal with what you put before them and most of the time, it doesn’t end well. This can only be made easier by working with experienced tax preparers, and according to most of our clients, TaxMedics in Kennewick, WA do it best.
CONCLUSION
You deserve any gain that comes from selling your house. Tax agencies also deserve their share. What you must remember is that as much as you are looking to maximize your benefits on capital gain tax, tax agencies will also be working hard on maximizing their share. If you don’t have the experience of how to go about it, they’ll probably take the advantage of the situation. This is the time you need someone who will act as an attorney and an advisor. With TaxMedics in Kennewick, WA, it is a guarantee that every penny you spent on trying to get what you deserve is catered for. If you are planning to sell your house and hopes to benefit from capital gain tax benefits, TaxMedics in Kennewick, WA is always here to help you. Make a connection with the right people today and realize what you’ve been missing.
