Capital Gains can be both a burden and an asset when selling your home. Discover how.
In Dallas Fort Worth Real Estate as in any other business, investors are constantly looking for methods to reduce their tax impact on the bottom line. Real Estate has some interesting loopholes that benefit homeowners when it comes to the Capital Gains tax. Understanding what a Capital Gain is and why it is an asset to homeowners.
A Capital Gain is the value of a capital asset; such as your home, that gives it a higher worth than the price you originally paid. The gain however is not realized until the property is sold.
Capital gains can be both short-term, (one year or less) and long-term (more than one year). The rate at which your gains are calculated will be based on whether it is a long-term or short-term gain. Long-term Capital Gains are often calculated more favourably. Tax rates that apply to net capital gains is usually lower than tax rates on other sources of income.
Knowing what a capital gain is can be an asset during tax season. Capital gains on Real Estate are quite simple to grasp. As long as you are selling your primary residence; meaning a home you have lived in for a minimum of two years you can exclude up to $250,000 for a single individual, or $500,000 for a couple, of gains over the original purchase price of the home.
Knowing this basic information can save thousands of potential tax dollars. Following up with a professional accountant to clarify all of the details. Check your figures to maximize the potential tax savings with your capital gains. By utilizing your ability to sell a primary residence you are essentially becoming a magician, and making a portion of your taxes disappear.