How Do Capital Gains Affect the Home Selling Process?
Selling a home often returns a big profit, which might be subject to capital gains taxes. With this guide, sellers can begin to understand the rules of capital gains taxes and whether or not they may be required to pay them. Is the sale of a house a capital gain? Be sure to consult with a financial expert or real estate agent when selling a property for more help understanding what tax implications of selling a house can apply to a specific home sale.
How Do Capital Gains Taxes Work?
When selling a piece of property, the Internal Revenue Service (IRS) may have a stake in your profit. The profits earned from the sale of property are known as capital gains. Most people who do not own businesses seldom deal with capital gains taxes outside of the sale of a home. The reason is that many personal belongings that can be sold to another person, such as a car, are items that do not appreciate over time. Since homes have the ability to increase in value over time, individuals may have to settle capital gains on the sale.
When Do People Owe Capital Gains Taxes?
The good news is that there is an option for most sellers to exclude much or all of their capital gains from their taxes during tax season. This is called a capital gain exclusion and can help sellers avoid capital gain taxes. Capital gains refer to the difference between what was paid for the home and its current sale price. This means that the difference is the only thing that needs to be considered...
