What % of Capital Gains tax will I have to pay?

Question

My husband and I just bought our home in February and now we want to sell it. We bought the home for $120,000 and owe $113,000. We have added a $5000 privacy fence and a $2000 storage building not to mention the cosmetic repairs we've made to the house. We don't care to make anything off the house, we just want to sell it for what we have in it, maybe a little less. (It appraised for $137,000 before we did all of this work to it. (I don't know if that matters.) We live just outside of Myrtle Beach and we hate it here, we just want out. My question is, If we stay in the house for one year, what percentage of Capital Gains will we have to pay? We make under $40,000 a year. Will we have to pay tax on anything over $120,000 (our purchase price) or $127,000 (what we will actually have in it.)? We are willing to stay here until we've lived here a full year, but no longer.

Thanks for all the serious answers.

Judy, thanks so much! I didn't realize I could deduct the realtor's commission! Thanks!

Answer 1

Taxes due would depend on what you sell it for. The privacy fence and storage shed would be added to the cost of the house. The cosmetic repairs would not be. So you have $127K into it. The difference between that and what you sell it for (net - you get to subtract items like realtor's commissions that you pay) is your gain.

February isn't far off, so hanging in there until then makes sense. Staying a year would make your gain long-term. You're probably in the 15% bracket, which would mean your long term capital gain would have 5% tax applied. So if, for example, you sold your home for $150K and paid real estate commission of $9000, you'd have a gain of $150K - $127K - $9K, or $14,000, and your tax on that would probably be $700, which isn't all that bad if you really hate it there.

You'd have to stay two full years to avoid capital gains taxes at all, and doesn't sound like you want to do that. There is a little bit of an out here - if you move to a different area and can legitimately claim that the move was due to taking a new job, you can exclude some of the gain - basically, if you lived there a full year, you could exclude half of the gain, and just pay tax on the other half. But if you're retired, you don't have that option.

What you still owe, and what it is or was appraised at, make no difference to the taxes you'll pay.

Good luck on selling your house quickly and at a good price.

Answer 2

If you sell it before you have lived in the house for two years you will have to pay tax. If you sell within one year you would have a short term gain and pay at whatever your tax rate is. If you sell it after one year the gain would be long term and you would pay 15% federal tax. However, if you sell it after two years you would still have a gain but you would not pay any tax on the first $500,000 of gain since it would qualify as your principle residence.
I would suggest trying to stick it out two years and not pay any tax. The exclusion for the sale of a personal residence is allowed after you have owned and lived in a house for two years it is not a once in a lifetime deal.

Answer 3

For tax purposes you can add improvements to your purchase price. If you stay over a year Capital Gains tax goes from "Your tax rate" to %15. If you stay for two years you don't have to pay capital gains tax. Appraisal doesn't matter, only the sales price.


Here is the Formula

Sales Price
- Purchase Price
- Improvements(Privacy fense and Storage Building)
______________________________________
Net Gain
* (Your tax rate)
______________________________________
Capital Gains Tax

*Cosmetic improvements are not tax deductible, You may also be liable for state tax depending on where you live

This doesn't cover everything as it is complex, but it is the basics

Answer 4

Capital effective factors Tax, taxes what precisely... it taxes earnings derived from doing not something effective. from shifting funds around, people that stay off this variety of earnings are parasites that stay entirely off the effective artwork of others. For real wealth manufacturing one needs to produce something. 'the convenience of the wealthy relies upon on an substantial grant of the damaging.' Voltaire with a view to respond to your question, i won't be in a position to describe why, simply by fact its basically stable for the wealthy to product their wealth, on the fee of something of society.

Answer 5

Here's the IRS info:

http://www.irs.gov/newsroom/article/0,,id=106799,00.html

http://www.irs.gov/taxtopics/tc409.html

Answer 6

Whatever the IRS says in Jan.