Do you have to pay taxes on the profit made when selling a house?

Question

If you purchased a house for 200K three years ago and now the house sells for 275k, do you have to pay taxes on the 75K gain?

Does the capital gains tax apply?

Answer 1

Federal taxes are where cap gains were initiated. At one time they were 50%. Under Pres. Ron Regan they were reduced to 35%. After congress and the senate were taken over by Republicans the rate was further reduced to 15% in 1997, and Bill Clinton signed it into law. The catch on your home is this: as long as the profit is under $250,000.00 for the husband and the same for the wife (total of $500,000.00 profit exempted) there is no tax due as long as the home was your primary home for 2 of the last 5 yrs. However it can vary from state to state on cap gains taxes at the state level, check with a local accountant for that info.

Your cost basis is what you paid what it cost you to buy and what ever your improvements were that added value, like you added a second 2 car garage, or added a bonus room. That adds to your cost basis and increases the total potential sale price and net to you. The costs to sale also increases your cost basis but may be applied another way with the same result.

For all non-home real property the cap gain rate is 15% unless you are a developer and in that case it is your regular tax rate. If you buy investment real property and hold it for 12 months plus 1 day the rate is 15%, but sell it in less than a yr and it again is your normal tax rate. However if your normal tax rate is 10% (as in low income) then the cap gain rate could also be at 10%, your accountant will give you the best tax advice.

If you sell for no gain there is no tax. Example: you inherit property that is also under the fed inheritence tax exemption level your cost basis becomes what the property value was the day you inherited it. In this case there is no federal cap gain tax due. It becomes prudent also at the time of inheritance you pay to have the property appriased, and pray it appraises high but under the fed threshold for tax exemption status. Then if you sell it right away and below the appraisal value you owe no cap gain tax.

Hope this helps some.

Answer 2

I believe that it varies by state, but here in California you do not have to pay tax on gains from the sale of real estate so long as you have lived in the house as your primary residence for at least 2 years (the two year total can be broken up and spread out over an upt to 5 year period).

If you meet the above criteria, there is a $250,000 tax exemption for single persons, and up to $500,000 for married couples.

Answer 3

Federal - no, if you owned and lived in the house for 2 or the previous 5 years, you have not excluded the gain on the sale of another home in the past 2 years, and gain is less than $250,000 ($500,000 for a married couple). So from your description, assuming you lived there for the three years you owned it, you're OK at the federal level.

State: depends on where you live.

Answer 4

I can only speak for the state of Florida.

Down here you do not pay any taxes on the profit made by selling your Home, under the following conditions:

- It has to be your main residence for 2 years.
- It's limited to a profit gain of $250,000 per indivual or $500K for a married couple.

Answer 5

yes, its called capital gains tax.

Answer 6

Yes.

Answer 7

i think you have to pay taxes on everything

Answer 8

yes and yes