Understanding capital gain tax on Real Estate is the tax that is due when a property is sold for a higher price than it was purchased for.

This capital gain is taxed at the time of sale, regardless of whether the seller is an individual or a business.

The amount of capital gain tax that is due will depend on the length of time the property was owned and the type of property being sold.

If the property was owned for more than one year, the capital gain is subject to long-term capital gains tax rates, which are lower than short-term capital gains tax rates.

Additionally, the capital gain may be subject to additional taxes such as state taxes, local taxes, etc.

The proceeds of the sale must be reported to the IRS and taxes must be paid.

Here is what you need to know:

1. Home Improvement Deductions: Homeowners can deduct certain home improvement projects, such as replacing windows or doors, adding insulation to the walls or attic, or adding central air conditioning or heating.

The deductions are based on the amount of money you spend on the project. You must also remember to keep receipts for any materials purchased for these projects.

1. Real Estate Taxes: Another potential deduction for homeowners is for real estate taxes. If you pay local taxes on your property, you can deduct the amount paid. Some states also offer additional tax deductions for senior citizens or those with disabilities.

2. Interest on Mortgage Payments: Homeowners in this price range may also be able to deduct the interest portion of their mortgage payment. This deduction is based on the amount you owe on your property and cannot exceed the amount of interest you actually pay in a given year.

3. Capital Gains Exclusion: If you sell your home at a gain, you may be able to take advantage of the capital gains exclusion.

This allows you to exclude up to $250,000 (or $500,000 if filing jointly) of gains from the sale of your primary residence from taxes.

What can you deduct from capital gain tax in real estate?

When owning a house, you can deduct certain expenses associated with the sale of the house from the capital gain tax.

These expenses include: real estate commissions, legal fees, title search fees, advertising fees, and any points paid when obtaining a mortgage.

You may also be able to deduct any improvements made on the property that increased its value.

By taking advantage of these tax deductions and exclusions, you may be able to significantly reduce your tax burden. It is important to speak with a qualified tax professional to ensure you qualify for these deductions and receive the most benefit.

Steve Olmos
Selling Real Estate in Southern California since 1980

Steve Olmos: www.lookingrealestate.com/contact-information
Homequest real estate

Diana Olmos: www.mortgagemarketingmentor.com
Statewide Funding Inc.