Tax Breaks On Selling Your Home, Vacation, Or Investment Property
With a personal residence, investment real estate, or other investment property, consider taxes before you sign. Your gain will often be long term capital gain, meaning a federal tax rate of 15 to 20%, depending on your income. Depending on your income, you may have to add another 3.8% in federal taxes. That’s the net investment income tax added by Obamacare. President Trump said he would repeal it, but so far that hasn't happened.
That means up to 23.8% in federal tax, which is better than 39.6% on ordinary income. Add your state taxes too. But aren't there breaks to eliminate or defer the taxes? First, you need to distinguish between personal use property, such as your principal residence, and investment or business property. If you sell your principal residence and have a gain, it's taxable. However, if you have lived there as your primary residence for two years out of the last five, you can shield up to $500,000 of gain if you are married and file jointly. The exclusion is $250,000 if you file separately or are single.
Tax Breaks On Selling Your Home, Vacation, Or Investment Property
That means up to 23.8% in federal tax, which is better than 39.6% on ordinary income. Add your state taxes too. But aren't there breaks to eliminate or defer the taxes? First, you need to distinguish between personal use property, such as your principal residence, and investment or business property. If you sell your principal residence and have a gain, it's taxable. However, if you have lived there as your primary residence for two years out of the last five, you can shield up to $500,000 of gain if you are married and file jointly. The exclusion is $250,000 if you file separately or are single.
Tax Breaks On Selling Your Home, Vacation, Or Investment Property
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